Work detail

Implied Market Loss Given Default

Author: Mgr. Jakub Seidler
Year: 2008 - summer
Leaders: doc. PhDr. Ing. Ing. Petr Jakubík Ph.D. Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 93
Awards and prizes: M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance and for an extraordinarily good masters diploma thesis.
Link:
Abstract: This thesis 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, and discuss its role in Basel II framework. Further, we illustrate how the LGD can be extracted from market observable information with help of both the structural and reduced-form models. Finally, by using the adjusted Mertonian approach, 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.
Downloadable: Diploma Thesis of Seidler

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