Patterns of Rational Default
32 Pages Posted: 9 Nov 1999
Date Written: September 1999
In this paper, we move closer to the interest of empirical research by providing the entire distribution of default's severity not just a summary total. The total price of a mortgage's default option already provides a rough summary statistics of the unconditional expected severity of default, but as well be seen. distributions of severity are both disperse and skewed and so inadequately describe by even their conditional means. The results make it clear that the likelihood of default and the likely magnitude of that default must be treated as separate phenomena.
JEL Classification: G12, G21
Suggested Citation: Suggested Citation