In credit risk models, exogenous recovery rate may neglect the impact on the tail of the loss distribution, and the exogenous specify of the recovery rate leads to the possible model risk. This paper incorporates the factor diffusion process into the structure model of default, derives the inherent relation between the recovery rate and the default probability and analyzes the dependence of expected recovery rate on the expected default probability by using the MC technology. The result shows there are strong negative correlation between expected recovery rates and default probability. Furthermore, the volatility of the asset value has positive compact on the correlation. In the framework of the endogenous recovery rate, the probability distribution of the credit loss is derved, and two index, Credit VaR and ETF, which is the measurement of the credit risk are computed. Finally, the performance of the endogenous recovery rate is tested-based on credit risk model using the market data,which shows that the model can well-character the evolution of the history default probability and recovery rates.
WU Jian-hua, WANG Xin-jun, ZHANG Ying
. Endogenous Recovery Rate and Credit Risk Measurement[J]. Chinese Journal of Management Science, 2016
, 24(1)
: 1
-10
.
DOI: 10.16381/j.cnki.issn1003-207x.2016.01.001
[1] Merton R C. On the pricing of corporate debt: The risk structure of interest rates[J]. The Journal of Finance, 1974, 29(2): 449-470.
[2] Black F, Cox J C. Valuing corporate securities: Some effects of bond indenture provisions[J]. The Journal of Finance, 1976, 31(2): 351-367.
[3] Jokivuolle E, Peura S. A model for estimating recovery rate and collateral haircuts for bank loans [J]. European Financial Management, 2003, 9(3):611-627
[4] Giesecke K. Credit risk modeling and valuation: An introduction[J]. Ssrn Electronic Journal, 2004:1-67.
[5] Asvanunt A, Staal A. The corporate default probability model in Barclays Capital POINT Platform (POINT CDP)[M]. Portfolio Modeling, Barclays Capital, 2009.
[6] Asvanunt A, Staal A. The POINT Conditional Recovery Rate (CRR) Model[M]. Portfolio Modeling, Barclays Capital, 2009.
[7] Jarrow R A, Turnbull S M. Pricing derivatives on financial securities subject to credit risk[J]. The Journal of Finance, 1995, 50(1): 53-85.
[8] Jarrow R A, Lando D, Turnbull S M. A Markov model for the term structure of credit risk spreads[J]. Review of Financial Studies, 1997, 10(2): 481-523.
[9] Duffie D, Singleton K J. Modeling term structures of defaultable bonds[J]. Review of Financial Studies, 1999, 12(4): 687-720.
[10] Houweling P, Vorst A C F. An empirical comparison of default swap pricing models[J]. Journal of labor Economics, 2015, 33(2):269-296.
[11] Frye J. Depressing recoveries[J]. Risk-London-Risk Magazine Limited, 2000, 13(11): 108-111.
[12] Pykhtin M. Recovery rates: Unexpected recovery risk[J]. Risk-London-Risk Magazine Limited, 2003, 16(8): 74-79.
[13] Andersen L, Sidenius J. Extensions to the Gaussian copula: Random recovery and random factor loadings[J]. Journal of Credit Risk Volume, 2004, 1(1): 29-70.
[14] 黄大海. 违约贷款回收率: 基于国外实证研究的分析[J]. 上海金融, 2006, (10): 55-58.
[15] 王国栋, 詹原瑞. 信用风险中回收率分布的双 Beta 模型[J]. 中国管理科学, 2011, 19(6): 10-14.
[16] 汪飞星, 姚磊. 聚合信用风险模型的改进和研究[J]. 价值工程, 2013, 32(5): 168-169.
[17] 陈暮紫, 陈浩, 马宇超, 等. 基于广义 Beta 回归的不良贷款回收率模型[J]. 数理统计与管理, 2011, 30(5): 810-823.
[18] Carty L V, Lieberman D. Defaulted bank loan recoveries[J]. Working Paper, Moody's Investors Service, 1996.
[19] Frye J. Collateral damage detected[J]. Emerging Issues, 2000 (Sep).
[20] Bakshi G, Madan D B, Zhang F X. Understanding the role of recovery in default risk models: Empirical comparisons and implied recovery rates[R]. Financial and Economics Board of Governors of the Federal Reserve System (US), 2001.
[21] Hu Y T, Perraudin W. The dependence of recovery rates and defaults[R]. Discussion Series, Birbeck College and Bank of Working Paper, England, 2002.
[22] Cantor R, Hamilton D T, Ou S. Default and recovery rates of corporate bond issuers[R].Working Paper, Moodys Investors Services, 2002.
[23] Carey M, Gordy M. Systematic risk in recoveries on defaulted debt[R].Working Paper Federal Reserve Board, 2003.
[24] Altman E I, Brady B, Restiand A, et al. The link between default and recovery rates: Theory, empirical evidence and implications [J]. Journal of Business, 2005, (78):2203-2228.
[25] Hamilton D T.Default and recovery rates of corporate bond issuers: 2000 [R].Working Paper, Moody.s Investors Service, 2001.
[26] Hu Yen-Ting, Perraudin W.The dependence of recovery rate and defaults[R]. Working Paper, Birbeck College and Bank of England, 2002.
[27] Hull J C, White A D.Valuation of a CDO and an nth to default CDS without monte carlo simulation[J].The Journal of Derivative, 2004, 12(2): 8-23.
[28] Das S R, Hanouna P. Implied recovery[J]. Journal of Economic Dynamics and Control, 2009, 33(11): 1837-1857.
[29] Guo Xin, Jarrow R A, Zeng Yan. Modeling the recovery rate in a reduced form model[J]. Mathematical Finance, 2009, 19(1): 73-97.
[30] Chava S, Stefanescu C, Turnbull S. Modeling the loss distribution[J]. Management Science, 2011, 57(7): 1267-1287.
[31] 陆懋祖. 高等时间序列经济计量学[M]. 上海:上海人民出版社, 1999.
[32] 孙立娟, 风险定量分析[M].北京:北京大学出版社, 2011.
[33] Acerbi C, Tasche D. On the coherence of expected shortfall[J]. Journal of Banking & Finance, 2002, 26(7): 1487-1503.
