Hi.
How is it going?
In IFRS 9 when calculating the expected loss. The Loss given default is one factor to be considered. According to Basel II for senior debt without any collateral an LGD of 45% could be used when applying IRB Foundation. It is better to use the Basel benchmark or (1- CDS Recovery Rate) gotten from CDSV in Bloomberg?
Serving the Quantitative Finance Community
Re: LGD - IRB Foundation or CDS Recovery Rate?
IFRS guidance reccomends usage of loan level data on best effort basis including discounted cash flows in recovery. Both the approaches dont incorporate that
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- henrywuhu1
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Re: LGD - IRB Foundation or CDS Recovery Rate?
Thanks for your response rrao4. For loans i am pretty sure to use discounted cashflows in recovery. but what is the recommendation about investment portfolios?
Henry Wu Hu
Re: LGD - IRB Foundation or CDS Recovery Rate?
...pooof...duplicate post
Last edited by rrao4 on February 14th, 2018, 7:29 pm, edited 2 times in total.
Re: LGD - IRB Foundation or CDS Recovery Rate?
If loan level info not possible then better to use market level value rather than static value of 45%. IFRS 9 requires FVPL for investments, CDS based will be more dynamic and can be adjusted according to the scenario
Re: LGD - IRB Foundation or CDS Recovery Rate?
what are you upto in IFRS 9? I think you asked a question on it earlier too