Any ideas about how to precisely predict LGD? How to model LGD?

Data. Lots of it. Look for patterns / clusters and identify the criteria that distinguish these clusters. I believe there are some commercial data sets available, though I'm not exactly sure which - try the usual Risk data suspects. There are almost certainly academic studies available as well - again I can't give references as I am an observer to my firm's processes rather than a participant.

QuoteOriginally posted by: csparkerData. Lots of it. Look for patterns / clusters and identify the criteria that distinguish these clusters. I believe there are some commercial data sets available, though I'm not exactly sure which - try the usual Risk data suspects. There are almost certainly academic studies available as well - again I can't give references as I am an observer to my firm's processes rather than a participant.dude,I am interesed in knowing what LGD should be under extremely bad market situation.

Quotedude,I am interesed in knowing what LGD should be under extremely bad market situation.That would be 100%, Bob. Rule of thumb: if you are sitting at the table, and you don't know who the new equity is, then you are the new equity.

Quoteif you are sitting at the table, and you don't know who the new equity is, then you are the new equity

Does J sit on the Basel committee? Look here for why.

QuoteOriginally posted by: csparkerDoes J sit on the Basel committee? Look here for why.any ideas about stress testing LGD and corrlated LGD will be very appreciated.

Look, Bob, if you want to have a reliable estimate of LGD, you need to be pretty damn close to the actual default. If you are sitting pretty in investment grade, you might as well just choose your favorite random number generator and order another round of low-carb beers.Once you get close to where default is likely, then you can look at 1) what is likely to happen in event of default (know the law down to the specific jurisdiction and even the judge if possible, and know who will be able to get paid before you either contractually or just by dirty dealing strong arm tricks.)2) how much will the assets be worth in the event of a forced sale

Maybe J is a supervisor who has to review the slightly awkward situation the "resolution" puts us in. I wish him / her well.