<t>Err,As a long as the recovery value is not determined at the default date, and as long as the defaulted name continue to be traded between the default date and the auction date, I maintain my position: the loss process cannot be monotonic during this period. Now I am off for two weeks. You have p...

The fact that the defaulted name continue to be traded in the market between the default day and the auction day is enough to undestand that loss process is not an increasing process during this period as the recovery can goes up as well as down.

<t>Primo,>>> its not LOSS yet it just an expected loss (present value or Mark to market). I dont agree with you on that. It is not because you did not settle yet that you cannot count it as the loss. The name has alread defaulted. and at this time you need to count it as a loss.The situation is like...

<t>>>>>In the interest rate world there are models which model the interest rate as a normal process, which allows for negative interest rates. It was deemed to be not a problem "because of the value of the volatility". Guess what, now it is a problem. But recently (during fall 2008) we saw some neg...

<t>Hi Err,>>>> can you clarify if you now agree that the portfolio loss SHOULD BE modeled as an increasing process? I did not say this. It is clear. For me as of today the recovery is not determined at the default date but at the auction date. So the loss process during this period is not necesserly...

<t>In my model the impact of the brownian motion is quite smal because of the value of the volatility and the factor N_t/N!! Which let the most important part of the loss value come from (1 - R)N_t/N. And this last part is an increasing process. I am not saying my model is perfect. There is no perfe...

<t>In my paper I chose to model the dynamic of the loss process over time, which include the period before a default date, after an auction date and between! In my model the impact of the brownian motian is quite smal because of the value of the volatility and the factor N_t/N!! Which let the most i...

<t>Err,I agree only on the fact that the (released) settled loss on a portfolio obligors should be an increasing process!!! Which the value of the loss process after the auction date!!!!If you want my point is like this: Between the default date and auction date the loss process is not necesserly an...

>>>>but back to the initial question, do you agree that relaised (settled) Loss on a Portfolio of credit obligors should be increasing ? Yes definitely!. I agree with you on the fact that the (released) settled loss on a portfolio obligors should be an increasing process!!!

<t>Primo,I agree with you if you say that the only date that matters is the auction date. But in between (the default and the auction) how do you mark your name in the CDO portfolio? do you put the name in default status or not? the answer is Yes I guess! Which recovery do you use? the markIt recove...

<t>Primo,I am not talking about E(LT/Ft). Because you have the default date and the auction date(when the recovery value becomes known). So between these two date the recovery value is not known yet and by the way is random. So during this period of time the Loss process is not an increasing process...

Have a look at Patrick Hagan paper ("ACCRUAL SWAPS AND RANGE NOTES"). Her wrote a nice paper in this subject.The Kid

You're right Sam!But in the market still there is no consensus on the methodology used for the random recovery. And also the market still quote on normal base correlation, I mean without random recovery.

could you fit the market data of 24/11/2008 and 12/12/2008 on CDX.IG9?I could not fit with krekel (2 steps), A&H(R tilde 0) on these market data. However with Chatbi I can!

YES!even with the stochastic recovery!!!!