This paper introduces a test for zero correlation in situations where the correlation matrix is large compared to the sample size. The test statistic is the sum of the squared correlation coefficients in the sample. We derive its limiting null distribution as the number of variables as well as...

When calculating the cost of entering into a credit transaction the predominant stochastic component is the expected loss. Often in the credit business the one-year probability of default of the liable counterpart is the only reliable parameter. We use this probability to calculating the exact...

We derive approximate formulae for the credit value-at-risk and the economic capital of a large credit portfolio. The representation allows to change the risk horizon quickly and avoids simulation or numerical procedures. The Poisson mixture model is equivalent to CreditRisk and uses the same...

Most credit portfolio models exclusively calculate the loss distribution for a portfolio of performing counterparts. Conservative default definitions cause considerable insecurity about the loss for a long time after the default. We present three approaches to account for defaulted counterparts...

The risk of a credit portfolio depends crucially on correlations between latent covariates, for instance the probability of default (PD) in different economic sectors. Often, correlations have to be estimated from relatively short time series, and the resulting estimation error hinders the...

The risk of a credit portfolio depends crucially on correlations between the prob- ability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the resulting estimation error hinders the detection of a...

We derive approximate formulae for the credit value-at-risk and the economic capital of a large credit portfolio. The representation allows to change the risk horizon quickly and avoids simulation or numerical procedures. The Poisson mixture model is equivalent to CreditRisk and uses the same...

Most credit portfolio models exclusively calculate the loss distribution for a portfolio of performing counterparts. Conservative default definitions cause considerable insecurity about the loss for a long time after the default. We present three approaches to account for defaulted counterparts...