There are different recovery conventions. Two common ones are RMV (recovery of market value) and RT (recovery of Treasury value). For a given dollar value recovered on a default bond, it is generally the case that
A) RMV $\Leftrightarrow$ RT.
B) RMV $\geqslant$ RT.
C) Which one is greater depends on the level of interest rates.
D) None of the above.

Question

Quizplus · Accepted Answer

RMV (recovery of market value) typically results in a higher recovery value compared to RT (recovery of Treasury value) because RMV is based on the market value of the bond, which can include factors such as the bond's creditworthiness and market demand, potentially leading to a higher valuation than the more conservative Treasury-based recovery.

There Are Different Recovery Conventions ⇔\Leftrightarrow⇔ RT B) RMV ⩾\geqslant⩾ RT C) Which One Is Greater Depends on the Level

There Are Different Recovery Conventions $\Leftrightarrow$ RT
B) RMV $\geqslant$ RT
C) Which One Is Greater Depends on the Level