Time matters: How default resolution times impact final loss rates

URN to cite this document:: urn:nbn:de:bvb:355-epub-463381
DOI to cite this document:: 10.5283/epub.46338

Betz, Jennifer

; Kellner, Ralf ; Rösch, Daniel

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Date of publication of this fulltext: 15 Feb 2022 07:29

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Abstract

Using access to a unique bank loss database, we find positive dependencies of default resolution times (DRTs) of defaulted bank loan contracts and final loan loss rates (losses given default, LGDs). Due to this interconnection, LGD predictions made at the time of default and during resolution are subject to censoring. Pure (standard) LGD models are not able to capture effects of censoring. ...