Distressed Debt Prices and Recovery Rate Estimation

  title={Distressed Debt Prices and Recovery Rate Estimation},
  author={Xin Guo and Robert Jarrow and Haizhi Lin},
This paper has two purposes. First, it uses distressed debt prices to estimate recovery rates at default. In this regard, estimates are obtained for three recovery rate models: recovery of face value, recovery of Treasury, and recovery of market value. We show that identifying the "economic" default date, as distinct from the recorded default date, is crucial to obtaining unbiased estimates. The economic default date is de…ned to be that date when the market prices the …rm’s debt as if it has… CONTINUE READING
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