This paper offers a countercyclical view of LGD risk. The model can be combined with a default probability model to serve as a regulatory prudential tool. Such a tool provides a solution to the ...

The validation of an LGD model typically includes backtesting, which involves the process of evaluating to what degree the internal model estimates still correspond with the realized observations.

and the development of an LGD estimation model. In this study, using a data set composed of five Japanese regional banks, we propose an LGD estimation model using a two- stage model, classification ...