assumptions regarding the structure of systematic and idiosyncratic risks and the nature of firm heterogeneity. The theoretical … portfolio weights. In either case, neglecting parameter heterogeneity can lead to underestimation of expected losses. But, once … expected losses are controlled for, neglecting parameter heterogeneity can lead to overestimation of risk, whether measured by …

assumptions regarding the structure of systematic risk and the nature of exposure or firm heterogeneity. We derive fat …-tailed correlated loss distributions arising from Gaussian risk factors and explore the potential for risk diversification. Where … further risk reduction is possible by changing the portfolio weights. In either case, neglecting parameter heterogeneity can …

assumptions regarding the structure of systematic risk and the nature of exposure or firm heterogeneity. We derive fat … of) risk diversification. Where possible the results are generalized to non-Gaussian distributions. The theoretical … asymptotically, by changing the portfolio weights. In either case, neglecting parameter heterogeneity can lead to underestimation of …

assumptions regarding the structure of systematic risk and the nature of exposure or firm heterogeneity. We derive fat …-tailed correlated loss distributions arising from Gaussian risk factors and explore the potential for risk diversification. Where … further risk reduction is possible by changing the portfolio weights. In either case, neglecting parameter heterogeneity can …