Babbs, Simon H and Johnson, Andrew E (1999): Severe Loss Probabilities in Portfolio Credit Risk Models.
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We derive explicit sharp bounds on the distribution of the number of defaults from a pool of obligors with common probability of default and default correlation. These bounds are extremely wide, implying that default probabilities and default correlations only very loosely determine probabilities of severe portfolio losses. Our results quantify and thereby reinforce Gordy’s (2002) statement that “Capital decisions ... depend on higher moments”.
|Item Type:||MPRA Paper|
|Original Title:||Severe Loss Probabilities in Portfolio Credit Risk Models|
|Keywords:||Portfolio Credit Risk Models|
|Subjects:||C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C16 - Specific Distributions
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
|Depositing User:||Andrew Johnson|
|Date Deposited:||28. May 2010 06:42|
|Last Modified:||21. Feb 2013 18:27|
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