A Research On Lgd In IRB Approach Of The New Basel Capital Accord

The New Basel Capital Accord is going to be implemented at the end of 2006 between the member countries. IRB Approach is one of the greatest innovations in the New Basel Capital Accord, whose application requirements and techniques are absorbed utmost by financial members all of the world. All commercial banks in the world are positively preparing for actualizing the IRB Approach. LGD (Loss given Default), which is one of the most important parameters in IRB Approach, has big relationship with IRB Approach's successfully implementation. However, LGD is more complicated than other parameters to measure, this thesis is going to analyze the parameter LGD, sorting and comparing all kinds of LGD measurements in the world, discussing LGD with different kinds of exposures, and solving problems in the process of estimating LGD.First, the distinctions between 1988 Basel Capital Accord and the New Basel Capital Accord, on these bases, this chapter shows IRB Approach and its important parameters, which is the core contents in the New Basel Capital Accord. Then, this chapter introduces the current problems in calculating parameter LGD.Second, introduction into fundamental conceptions about LGD, analyzing the macro factors (such as economic cycles, different industries. etc) and the micro factors (debt seniority, industry size. etc) that influence LGD.Third, this paper introduces LGD's measurement techniques and measurement regulations in detail. This presents collaterals that influence LGD's measurement in foundation IRB approach; it involves the types of collaterals, the eligible collaterals, the impact on LGD measurement when collaterals are lost, etc.Fourth, Comparing all kinds of measurement techniques of LGD in advanced IRB approach. These techniques include factor models, mortality models, non-parameter models, etc.Fifth, based on qualitative analysis and quantitative analysis of LGD, the text investigates different features and measurements of each asset's LGD (including banking, security industry, leasing industry), especially bringing forward LGD research on securities and leasing industry into this thesis which are not mentioned in The New Basel Capital Accord.Sixth, the author introduces some crucial problems and relevant counter measurements when measuring LGD.