DYNAMIC PREDICTION OF LGD MODELING METHODOLOGY
Bibliographic record
Abstract
LossCalc ™ version 2.0 is the Moody's KMV model to predict loss given default (LGD) or (1- recovery rate). Lenders and investors use LGD to estimate future credit losses. LossCalc is a robust and validated model of LGD for loans, bonds, and preferred stocks for the US, Canada, the UK, Continental Europe, Asia, and Latin America. It projects LGD for defaults occurring immediately and for defaults that may occur in one year. LossCalc is a statistical model that incorporates information at different levels: collateral, instrument, firm, industry, country, and the macroeconomy to predict LGD. It significantly improves on the use of historical recovery averages to predict LGD, helping institutions to better price and manage credit risk. LossCalc is built on a global dataset of 3,026 recovery observations for loans, bonds, and preferred stock from 1981-2004. This dataset includes over 1,424 defaults of both public and private firms—both rated and unrated instruments—in all industries. LossCalc will help institutions better manage their credit risk and can play a critical role in meeting the Basel II requirements on advanced Internal Ratings Based Approach. This paper describes Moody's KMV LossCalc, its predictive factors, the modeling approach, and its out of-time and out of-sample model validation.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.006 |
| Meta-epidemiology (narrow) | 0.001 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.001 | 0.001 |
| Open science | 0.002 | 0.001 |
| Research integrity | 0.001 | 0.002 |
| Insufficient payload (model declined to judge) | 0.004 | 0.002 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".