RT Journal Article SR Electronic T1 A Model for Recovery Value in Default JF The Journal of Fixed Income FD Institutional Investor Journals SP 15 OP 29 DO 10.3905/jfi.2011.21.2.015 VO 21 IS 2 A1 Terry Benzschawel A1 Adoito Haroon A1 Tuohua Wu YR 2011 UL https://pm-research.com/content/21/2/15.abstract AB The amount recovered in default is as important as default probability for estimating expected losses on risky assets and for determining fair credit spreads, yet recovery value has been much less well studied than default. Recent research has increased substantially information about recovery value in default. From those studies, principles have emerged regarding the influence of collateral, credit cycle, seniority, industry sector, credit quality, and geography on loss given default. This article presents a decision-tree model that embeds known determinants of recovery value. Simulations of historical default rates and correlated defaults using the model generate distributions of recovery values that replicate well the statistical properties of recovery values reported in the literature.TOPICS: Credit risk management, simulations, fixed-income portfolio management