Publication detail

Survival Analysis in LGD Modeling

Author(s): RNDr. Jiří Witzany Ph.D., Michal Rychnovský, Pavel Charamza
Type: IES Working Papers
Year: 2010
Number: 2
ISSN / ISBN:
Published in: IES Working Papers 2/2010
Publishing place: Prague
Keywords: credit risk, recovery rate, loss given default, correlation, regulatory capital
JEL codes: G21, G28, C14
Suggested Citation: Witzany, J., Rychnovský, M., Charamza, P. (2010). “ Survival Analysis in LGD Modeling ” IES Working Paper 2/2010. IES FSV. Charles University.
Abstract: The paper proposes an application of the survival time analysis methodology to estimations of the Loss Given Default (LGD) parameter. The main advantage of the survival analysis approach compared to classical regression methods is that it allows exploiting partial recovery data. The model is also modified in order to improve performance of the appropriate goodness of fit measures. The empirical testing shows that the Cox proportional model applied to LGD modeling performs better than the linear and logistic regressions. In addition a significant improvement is achieved with the modified “pseudo” Cox LGD model.
Downloadable: WP 2010_2_Witzany, Rychnovský, Charamza

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