What is Recovery rate in FRM Part 1?

The fraction of exposure recovered after default; in a simple framework it is one minus loss given default. Recovery assumptions materially affect credit spreads, expected loss, and tranche values and can worsen during systemic stress.

Recovery rate

FRM Part 1 glossary · Valuation And Risk Models

Definition

The fraction of exposure recovered after default; in a simple framework it is one minus loss given default.

Recovery rate in plain English

Recovery assumptions materially affect credit spreads, expected loss, and tranche values and can worsen during systemic stress.

Learn these first

Operational risk
Credit risk

Practice Recovery rate

What is the expected loss (EL) for the year?

Related FRM Part 1 terms

Backtesting
Basis
Basis point
Binomial option pricing model
Black-Scholes-Merton model
Coherent risk measure
Component VaR
Convexity
Delta
Duration (modified)

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