Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83455
Authors: 
Seidler, Jakub
Year of Publication: 
2008
Series/Report no.: 
IES Working Paper 26/2008
Abstract: 
This paper focuses on the key credit risk parameter Loss Given Default (LGD). We describe its general properties and determinants with respect to seniority of debt, characteristics of debtors or macroeconomic conditions. Further, we illustrate how the LGD can be extracted from market observable information with help of the adjusted Mertonian structural approach. We present a derivation of the formula for expected LGD and show its sensitivity analysis with respect to other structural parameters of the company. Finally, we estimate the 5-year expected LGDs for companies listed on Prague Stock Exchange and find out, that the average LGD for this analyzed sample is around 20%. To the author's best knowledge, those are the first implied market estimates of LGD in the Czech Republic.
Subjects: 
loss given default
credit risk
structural models
JEL: 
C02
G13
G33
Document Type: 
Working Paper
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