Understanding the Role of Recovery in Default Risk Models : Empirical Comparisons and Implied Recovery Rates ∗

@inproceedings{Bakshia2006UnderstandingTR,
  title={Understanding the Role of Recovery in Default Risk Models : Empirical Comparisons and Implied Recovery Rates ∗},
  author={Gurdip Bakshia and Dilip Madanb and Frank Zhangc},
  year={2006}
}
  • Gurdip Bakshia, Dilip Madanb, Frank Zhangc
  • Published 2006
This article presents a framework for studying the role of recovery on defaultable debt prices for a wide class of processes describing recovery rates and default probability. These debt models have the ability to differentiate the impact of recovery rates and default probability, and can be employed to infer the market expectation of recovery rates implicit in bond prices. Empirical implementation of these models suggests two central findings. First, the recovery concept that specifies… CONTINUE READING
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