realized correlation and volatility. Using a simple ordinary least squares (OLS) regression framework, correlations are shown … much greater in down markets than in up markets. This suggests that it is not a lack of diversification that matters for …

. The asset correlation parameter describes the degree of default rate fluctuations and is part of the Basel Accord …'s formula on capital requirements. We estimate the asset correlation parameter for homogenous segments such that of banks from … default data. We find that the regulatory asset correlation parameter cannot be considered prudent for some homogenous …