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What are some methods for estimating recovery rates for an entity? For example, say I am trying to find the recovery rate that would be used to price a single name CDS on JPMorgan.

The true recovery rate is of course highly uncertain and dependent on the distribution of debt within a company's capital structure. Is there a standard quantitative approach for trying to estimate this? Or is there a convenient traded asset whose price I can use to infer an appropriate rate? What method would be the most accurate?

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    $\begingroup$ Market assumes 40% for senior debt, 20% for sub, 10% for preferred. You only tweak this if spreads widen and you see bond prices fall towards distressed values. Then you can calibrate recovery to the bond prices. $\endgroup$ – Dom Oct 31 '16 at 13:51
  • $\begingroup$ what about if I want to measure the recovery rate on the entire entity, eg fraction of total enterprise value of the corporate family at default available to be distributed to creditors? $\endgroup$ – beeba Oct 31 '16 at 14:18
  • $\begingroup$ If it's for pricing a CDS on a non-distressed name then it is not necessary. Especially as the CDS value is not very sensitive to the value of the recovery rate when spreads are low (investment grade level). $\endgroup$ – Dom Oct 31 '16 at 23:27

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