On the Measuring Approach to the LGD under the New Basel Accord

Loss Given Default(LGD) is a very important variable in calculating the regulatory capital,as well as a variable that must be measured by the banks which practice the advanced IRB.This paper firstly states the requirement of New Basel Accord on the advanced IRB-the downturn LGD;and then points out the drawbacks of traditional approaches to calculating LGD,which fail to match the requirements;and next puts forward a new framework for measuring depressing LGD,which is similar to the approach to measuring conditional PD;and finally provides some corresponding advices on measuring LGD to our banking.