The empirical study for recovery rates and theoretical study for credit risk model in consideration of recovery rate

2014 Fiscal Year Final Research Report

• Project/Area Number: 24730192
• Research Category: Grant-in-Aid for Young Scientists (B)
• Allocation Type: Multi-year Fund
• Research Field: Economic statistics
• Research Institution: Yokohama National University
• Principal Investigator: ITOH Yuki 横浜国立大学, 国際社会科学研究院, 准教授 (70579606)
• Project Period (FY): 2012-04-01 – 2015-03-31
• Keywords: デフォルト / 回収率

Outline of Final Research Achievements

We construct the theoretical model on debt recovery rate. About the problem that the actual debt recovery rate is concentrated in the 0% and 100%, we construct the theoretical model about corporate value of each industry, bankruptcy, and the state of corporate value at the time of bankruptcy that debt recovery rate difference is due to the bankruptcy situation of each industry. By this, we able to construct the model that big difference of bankruptcy probability arises.
Because rating agencies rate the companies not only by the default probabilities but also by the debt recovery rates, as far to the bankruptcy prediction, it is thought that prediction accuracy is poor. We construct the original default prediction model. Moreover, we empirically compare our default prediction model and the ratings of rating agencies. As a result, the accurate of our default prediction model is the same degree or more than the ratings of credit agencies.

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