Basics of Credit Risk - Universität Hohenheim
Basics of Credit Risk - Universität Hohenheim
Basics of Credit Risk - Universität Hohenheim
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Investment Banking and Capital Markets – <strong>Universität</strong> <strong>Hohenheim</strong><br />
Investment Banking and Capital Markets<br />
A Single-Step, Two-Stage Model (continued)<br />
Rearranging yields<br />
V risky = V No default − PD × (V No default − V Default<br />
= V No default × [1 − PD × (1 −<br />
default<br />
V<br />
) ] (25)<br />
V No default<br />
| {z }<br />
Rec<br />
| {z }<br />
LGD<br />
| {z }<br />
EL<br />
Equation (25) is a well-known expression on credit risk<br />
Chair for Banking and Finance Winter term 2009 Slide 7
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