Using a limiting approach to portfolio credit risk, we obtain analyticexpressions for the tail behavior of the distribution of credit losses. We showthat in many cases of practical interest the distribution of these losses haspolynomial ('fat') rather than exponential ('thin') tails. Our...

Dynamic models for credit rating transitions are important ingredients for dynamic credit risk analyses. We compare the properties of two such models that have recently been put forward. The models mainly differ in their treatment of systematic risk, which can be modeled either using discrete...

To measure performance of individual businesses and maximize shareholder value for the firm as a whole, banks need to decide how much capital to allocate to each business and what cost of capital to charge. Capital is typically allocated to reflect differences in risks and/or regulatory capital...