Research Article
Weight of the Default Component of CDS Spreads: Avoiding Procyclicality in Credit Loss Provisioning Framework
Table 4
Lifetime ECL for the bond of the Windstream Services as of March 30, 2018.
| | Lifetime ECL for Windstream Services LLC exposure as of March 30, 2018 |
| | Date (mm.yyyy) | 09.2018 | 03.2019 | 03.2020 | 03.2021 | 03.2022 | 03.2023 | 08.2023 | | Maturity horizon (years) (A) | 0.5 | 1 | 2 | 3 | 4 | 5 | 5.3 | | Spread quotes (bps) | 3808.2 | 2980.9 | 2428.9 | 2459.5 | 2692.2 | 3035.8 | 3036.7 | | WDC of BB-rated CDS | 57.0% | 57.0% | 56.8% | 56.6% | 51.4% | 46.1% | 45.3% | | Default component (bps) | 2169.6 | 1698.2 | 1379.3 | 1392.1 | 1382.5 | 1399.7 | 1375.4 | | Current cumulative PD projection (see (1)) | 17.13% | 26.03% | 40.18% | 56.90% | 70.80% | 83.89% | 86.70% | | Current marginal PD projection (B) | 17.13% | 8.90% | 14.15% | 16.72% | 13.90% | 13.09% | 2.81% | | Coupon | 6.375% | 6.375% | 6.375% | 6.375% | 6.375% | 6.375% | 6.375% | | Initial Yield (C) | 6.375% | 6.375% | 6.375% | 6.375% | 6.375% | 6.375% | 6.375% | | LGD (D) | 60% | 60% | 60% | 60% | 60% | 60% | 60% | | EAD/Nominal (p.p.) (E) | 103.19 | 103.19 | 106.38 | 106.38 | 106.38 | 106.38 | 102.17 | | Marginal ECL (F = B×D×E / (1+C) A) | 10.29 | 5.18 | 7.98 | 8.87 | 6.93 | 6.13 | 1.24 |
| | ECL lifetime (p.p.) | 46.61 |
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