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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. Long-term historical tables, the traditional solution, supply estimates that are static, backward-looking and insufficiently differentiated.
Moody's KMV LossCalc: A Powerful LGD Predictor For Assessing And Managing Risk
Moody's KMV 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 to capture the correlation between default risk and recoveries.
Moody's KMV LossCalc is the first model that calculates LGD for loans, bonds and preferred stock. It models the five major quantifiable drivers of LGD:
- Collateral
- Debt type and seniority class
- Borrower-specific information
- Industry-specific information
- Country and regional macroeconomic information
Powering Moody's KMV LossCalc: Comprehensive Database Of Defaulted Instruments
Moody's KMV 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
- Developed from over 3,000 recovery observations spanning two decades
- Extensive public documentation of the model, validation techniques and performance results including out-of-sample and out-of-time testing
Dynamic Inputs
- Forward-looking, equity market-based information on over 27,000 firms worldwide in Moody's KMV public firm model
- Monthly updates to region-specific 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 the United States, Canada, Latin America, Asia, the United Kingdom and Continental Europe
Detailed LGD Insight
- Obligation-specific LGD estimates at default and for one-year time horizons
- One-off calculations for individual transactions or input in portfolio analytics
- Graphing and simulations of LGD distributions in Moody's KMV Portfolio Manager™
Facilitating Basel Compliance
- LGD estimates can be calibrated to an institution's own recovery experience
- Over seven years of historical data for each country and region covered
- LGD estimates for a given instrument are adjusted over time
Ease Of Use
- Web-based access for one-off analysis or batch submission of groups of transactions
- Automated loading by Moody's KMV Portfolio Manager
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