Why should risk management systems account for parameter uncertainty? In order to answer this question, this paper lets an investor in a credit portfolio face non-diversifiable estimation-driven uncertainty about two parameters: probability of default and asset-return correlation. Bayesian...

This study is based on investors' viewpoint and adopts the accruals quality model [1] as proxy variable of earning quality. By applying the process capability concept in engineering application, we establish capability index of basis accrual quality and transform it into the investment risk...