LGD Risk Factors

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Definition

LGD Risk Factors denotes, in broad terms, the risk factors affecting the eventual Loss Given Default of credit portfolios, i.e. the degree to which the creditor will recover the scheduled cash flows of a loan or credit product.

Usage

To the degree that such risk factors can be quantified and modelled, they can be used in the construction in Loss Given Default Models. Many LGD risk factors are overlapping with those impacting the valuation of non-performing loans. The primary difference is that LGD Risk assessment is performed potentially years ahead of any default event, hence the possible range of economic and asset market conditions is very wide.

Indicative List

References

Contributors to this article

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