Difference between revisions of "Recovery Risk"

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== Definition ==  
 
== Definition ==  
'''Recovery Risk''' denotes the risk that following a [[Default Event]], contracts of the defaulting entity cannot be honoured in full, thereby leading to financial loss to the lender or other counterparty.   
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'''Recovery Risk''' denotes the risk that following a [[Default Event]], contracts of the defaulting entity cannot be honoured in full, thereby leading to financial loss to the lender or other counterparty.  Recovery risk is the complement of [[LGD Risk]]
  
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== See Also ==
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* [[Loss Given Default]]
  
 
== Issues and Challenges ==   
 
== Issues and Challenges ==   

Latest revision as of 17:13, 8 November 2019

Definition

Recovery Risk denotes the risk that following a Default Event, contracts of the defaulting entity cannot be honoured in full, thereby leading to financial loss to the lender or other counterparty. Recovery risk is the complement of LGD Risk

See Also

Issues and Challenges

  • Large Corporates and sovereigns are diversified entities with sufficient financial means, this imply that default events are actually fairly rare. This paucity of data makes the prediction of possible recoveries in case of default rather challenging. This is denoted as the Low Default Portfolios problem

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