TY - JOUR T1 - A Multifactor Approach for Systematic Default and Recovery Risk JF - The Journal of Fixed Income SP - 63 LP - 75 DO - 10.3905/jfi.2005.591610 VL - 15 IS - 2 AU - Daniel Rösch AU - Harald Scheule Y1 - 2005/09/30 UR - https://pm-research.com/content/15/2/63.abstract N2 - This article develops a simultaneous multifactor model for defaults and recoveries. Applying this model, risk parameters can be forecast using systematic and idiosyncratic risk factors and their implied correlations. The theoretical framework is accompanied by an empirical analysis in which a negative correlation between defaults and recoveries over the business cycle is observed. In the study, default and recovery rates are modeled by business cycle indicators, and the properties of the economic and regulatory capital given these risk drivers are shown. ER -