Modeling and estimating dependent loss given default
We propose a portfolio credit risk model with dependent loss given default (LGD)
which allows for a reasonable economic interpretation and can easily be applied to
real data. We build up a precise mathematical framework and stress some general
important issues when modeling dependent LGD. Finally, we calibrate the model
based on American bond data from 1982 to 2001 and compare the results with
recently published alternative models.