The Link between Default and Recovery Rates: Implications for Credit Risk Models and Procyclicality

By Edward I. Altman, Brooks Brady, Andrea Resti, A. Sironi. 2002

111 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/4855b175e2e155bc2e17819247e55d90d149a944

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Citations in the corpus

Understanding the Recovery Rates on Defaulted Securities (2003, methodology): “fault year and the aggregate supply of defaulted bonds measured mid-year in the default year (Altman et al. variables BDR and BDA, respectively) significantly lower recovery rates when employed in the absence of industry conditions. However, once industry conditions are employed, their effect is swa”
The Levered Equity Risk Premium and Credit Spreads: A Unified Framework (2010, background): “Moreover, Thorburn (2000), Altman et al. (2002), and Acharya et al. (2007) find that bankruptcy costs, 1−ανt , are countercyclical, i.e., α1 < α2, so we assume α1 = 0.7 and α2 = 0.9.26 Unconditional average debt issuance costs are in the order of 1.3% (Altinkilic and Hansen (2000)).”
Do Bankruptcy Codes Matter? A Study of Defaults in France, Germany, and the U.K. (2008, background): “In regressions (2) to (4) we also include interactive variables for collateral and particular types of collateral, such as real estate collateral and debtors (we combine the UK and Germany where they are very similar).”
The Aggregate Dynamics of Capital Structure and Macroeconomic Risk (2010, background): “Andrade and Kaplan (1998) report default costs of about 20% of asset value. Moreover, Thorburn (2000), Altman, Brady, Resti, and Sironi (2002) and Acharya, Bharath, and Srinivasan (2007) find that bankruptcy costs, 1 − ανt , are counter-cyclical, i.e., α1 < α2. Pulvino (1998) also provides evidence ”
Predictions of Default Probabilities in Structural Models of Debt (2004, background): “There is some evidence suggesting a negative correlation between default rates (positively related to leverage) and recovery ratios: see Altman et al. (2001) and Bakshi, Madan, and Zhang (2001).”
Revisiting Credit Scoring Models in a Basel 2 Environment (2002, methodology): “Finally, we summarize a recent report ( Altman, Brady, Resti and Sironi, [2002] ) on the”