Bank LGD Modelling

Client Needs & Objectives

This mission demonstrates our expertise in modelling Basel parameters for credit risk. It included the design of a model for the LGD parameter on a “low default portfolios” as part of the A-IRB framework of Basel II.

  • Context: A 2-month project within the modelling team
  • Client: A Luxembourg banking institution

Our approach

For the review of the bank’s internal models for credit risk, CH&Co. was involved in :

  • Benchmarking market practices for LGD modelling on « Low default » portfolios
  • Reporting the latest development in the methodology for building LGD models
  • Preprocessing of source data (Moody’s Default and Recovery Database)
  • The design of the bank’s LGD model
  • Exhaustive and comprehensive documentation of the model

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