Unresolved Defaults LGD Study 2020

Description:

This report describes the Global Credit Data (GCD) methodology for calculating loss given defaults (LGDs) for unresolved loans. The methodology benefits from GCD’s detailed and granular collection of post-default cash flow data and is based on extrapolations of historical recovery cash flows refined by the usage of risk drivers.

The methodology provides a straightforward, data-driven way of incorporating incomplete workout processes in the estimation of longrun average LGDs. Extensive validation both in- and out-of-sample has shown that the method works well in predicting LGDs for unresolved defaults.