Default Recovery Rates in Credit Risk Modelling: A Review of the Literature and Empirical Evidence

@article{Altman2003DefaultRR,
  title={Default Recovery Rates in Credit Risk Modelling: A Review of the Literature and Empirical Evidence},
  author={Edward I. Altman and Andrea Resti and Andrea Sironi},
  journal={Derivatives eJournal},
  year={2003}
}
Evidence from many countries in recent years suggests that collateral values and recovery rates (RRs) on corporate defaults can be volatile and, moreover, that they tend to go down just when the number of defaults goes up in economic downturns. This link between RRs and default rates has traditionally been neglected by credit risk models, as most of them focused on default risk and adopted static loss assumptions, treating the RR either as a constant parameter or as a stochastic variable… 
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