Why Beta-Distribution - Demand/Supply Theory of Recovery Rates

21 Pages Posted: 22 Jan 2007

Date Written: January 18, 2007

Abstract

A new model, which connects the distribution of recovery rates with the demand/supply framework for secondary securities, is suggested. This model explains why the beta- distribution is a good fit for recovery rates modeling. A comparison with published data is provided. The approach and formula proposed in this paper could be used to model recovery rates.

Keywords: Recovery Rates, Beta-distribution, demand curve, extreme value theory, default

JEL Classification: G15, G21

Suggested Citation

Morozovskiy, Alexander, Why Beta-Distribution - Demand/Supply Theory of Recovery Rates (January 18, 2007). Available at SSRN: https://ssrn.com/abstract=958150 or http://dx.doi.org/10.2139/ssrn.958150

Alexander Morozovskiy (Contact Author)

Fitch Ratings ( email )

One state street plaza
New York, NY 10004
United States

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