Esimating recovery rate for NPLs

The objective of the present paper is to propose a new method to measure the recovery performanceof a portfolio of non-performing loans (NPLs) in terms of recovery rate and time to liquidate. Thefundamental idea is to draw a curve representing the recovery rates during time, here assumeddiscretized, for example, in years. In this way, the user can get simultaneously information aboutrecovery rate and time to liquidate of the portfolio. In particular, it is discussed how to estimate sucha curve in presence of right censored data, i.e. when the NPLs composing the portfolio have beenobserved in different periods. Uncertainty about the estimates is depicted trough confidence bandsobtained by using the non-parametric Bootstrap. The effectiveness of the proposal is shown byapplying the method to a real financial data set about some portfolios of Italian unsecured NPLs takenin charge by a specialized operator.