I am trying to compare LGD/PD for Banks and other financial institutions using different approach thank Merton. Are there any publicly available data on which I can build?



Re LGD: you can look at Mark-iT for ISDA Credit Event Auction settlements, here's a link actually http://www.creditfixings.com/CreditEventAuctions/fixings.jsp

Obviously these will give recoveries as determined by bond auctions, varying according to SUB and SENIOR in the type of names you are looking at. These outcomes are a bit pathological for banks as SUB credit events sometimes had no deliverables given bail-ins, prior to the 2014 update to ISDA definitions, therefore $LGD = 1-R$ settled at 100% for SUB in several cases eg BES.

That may all be derivatives mumble swerve, clearly LGD on actual claims may vary from counterparty to counterparty where bilateral commutations maye have been agreed on a case by case basis (eg AIG), but it is a good demonstrable public source.

Re PDs I guess, (sadly) you have to go to ratings agencies but I don't have a link to hand.

  • $\begingroup$ Could you please comment more on how would you extract R using these data? Thank you. $\endgroup$ – Michael Mark Dec 5 '16 at 17:20
  • $\begingroup$ sure, so let's pick a nice vintage :): $\endgroup$ – Mehness Dec 5 '16 at 17:21
  • $\begingroup$ Final Results of the Ambac Financial Group CDS Auction, 10 December 2010 Final Price: 9.5 <- This is R, since this is the price at which bonds cleared On 10 December 2010, 14 dealers submitted initial markets, physical settlement requests and limit orders to the Ambac Financial Group auction administered by Creditex and Markit to settle trades across the market referencing Ambac Financial Group, Inc.. Relevant Currency USD $\endgroup$ – Mehness Dec 5 '16 at 17:29
  • $\begingroup$ In the same year we had capitulation in the Irish banking crisis, and: Anglo Irish Bank Auction Results, 09 December 2010 Anglo Irish Bank CDS Subordinated Bucket2 Final Price: 18.25 Anglo Irish Bank CDS Subordinated Bucket3 Final Price: 18 Anglo Irish Bank CDS SNR/SUB Bucket1 Final Price: 74.5 Anglo Irish Bank CDS Senior Bucket2 Final Price: 76 Anglo Irish Bank CDS Senior Bucket3 Final Price: 74.5 $\endgroup$ – Mehness Dec 5 '16 at 17:29
  • $\begingroup$ The Final Prices, i.e. recoveries, are distributed across buckets governed by maturity, which can happen in a Restructuring type of default as opposed to a mere Failure to Pay (where recovery / Final Price is just one number). You could take some kind of average in this case as SNR / SUB are so different $\endgroup$ – Mehness Dec 5 '16 at 17:29

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.