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Moody's KMV LossCalc™ is a powerful loss given default predictor that captures the correlation between default risk and recoveries.
Today's credit environment demands loss given default (LGD) estimates that are more precise, dynamic and forward-looking. LGD estimates drive bond and loan pricing, valuation, provisioning and identification of capital at risk. In addition, validated LGD estimates are a vital component of the Basel II Advanced Internal Ratings-Based Approach.
Sound credit portfolio management requires LGD estimates that are accurate and responsive to market changes. The traditional solution of long-term historical tables supply estimates that are static, backward-looking and insufficiently differentiated.
Moody's KMV LossCalc: A Powerful LGD Predictor For Assessing And Managing Risk
LossCalc offers the most predictive estimates of LGD in the industry. The superior accuracy of LossCalc comes from the inclusion of dynamic, forward-looking indices that make it the only model available on the market to capture the correlation between default risk and recoveries.
LossCalc is the first model that calculates LGD for loans, bonds, sovereigns, municipals and preferred stock. It models the quantifiable drivers of LGD:
- Firm-specific default probability
- Collateral
- Debt type and seniority class
- Geography
- Industryn
Powering Moody's KMV LossCalc: Comprehensive Database Of Defaulted Instruments
LossCalc includes detailed market-level and security-level data on recoveries from a global database, compiled over two decades, of more than 3,000 defaulted instruments of rated and unrated public and private firms.
Increased Accuracy And Transparency
- Accurate, dynamic predictions of LGD calculating default within an instantaneous, one-year and long-run time period.
- Developed from over 4,000 recovery observations spanning two decades.
- Extensive public documentation of the model.
- Linear regression model with EDFT, PD or Leverage as direct input.
- Enhanced treatment of collateral.
- Validation between post default prices and ultimate recovery.
Dynamic Inputs
- Forward-looking probability of default for over 35,000 publicly listed firms
- Monthly updates to regional and industry-specific credit cycle adjustments
- Index of 12-month corporate default rates
- Firm leverage and relative seniority of instruments
- Country and regional adjustments for merging and advanced markets
Detailed LGD Insight
- Obligation-specific LGD estimates at default and for instantaneous, one-year and long run time horizons
- One-off calculations for individual transactions or input in portfolio analytics
- Term Structure of LGD over five years™
Facilitating Basel Compliance
- LGD estimates can be calibrated to an institution's own recovery experience
- Stressed LGD outputs over the last ten years
Ease Of Use
- Web-based access for single name analysis and side-by-side comparison of two firms
- Batch submission directly from web interface
- XML system-to-system interface
- Data File Service (DFS)
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