Investigating Recovery and Loss Behavior of Defaulted U.S. Structured Finance Securities

Abstract

Loss severity (or recovery) given default is critical in calculating expected loss and the understanding of credit risk. This report provides the market with additional insight and transparency into the principal repayment and realized loss characteristics of defaulted U.S. structured finance securities. The report provides a cross-sectional regression analysis and examines the largest number of observations to date, thus providing added statistical weight to its findings. The report also gives the market additional analysis for some of the more uncertain aspects of recovery and loss severity rates in structured securities.