We consider a single period portfolio of n dependent credit risks that are subject to default during the period. We show that using stochastic loss given default random variables in conjunction with default correlations can give rise to an inconsistent set of assumptions for estimating the...

In this paper we investigate approximations for the distribution function of a sum S of lognormal random variables. These approximations are obtained by considering the conditional expectation E[S | Lambda ] of S with respect to a conditioning random variable Lambda.The choice for Lambda is...

In this paper we analyze and evaluate a standard approach financial institutions use to calculate their so-called total economic capital. If we consider a business that faces a total random loss S over a given one-year horizon then economic capital is traditionally defined as the difference...