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On the Performance of Recovery Rate Modeling

  • J. Samuel Baixauli
  • Susana Alvarez
Part of the Lecture Notes in Computer Science book series (LNCS, volume 3982)

Abstract

To ensure accurate predictions of loss given default it is necessary to test the goodness-of-fit of the recovery rate data to the Beta distribution, assuming that its parameters are unknown. In the presence of unknown parameters, the Cramer-von Mises test statistic is neither asymptotically distribution free nor parameter free. In this paper, we propose to compute approximated critical values with a parametric bootstrap procedure. Some simulations show that the bootstrap procedure works well in practice.

Keywords

Recovery Rate Asymptotic Distribution Credit Risk Beta Distribution Null Distribution 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2006

Authors and Affiliations

  • J. Samuel Baixauli
    • 1
  • Susana Alvarez
    • 2
  1. 1.Department of Management and FinanceUniversity of MurciaSpain
  2. 2.Department of Quantitative Methods for the EconomyUniversity of MurciaSpain

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