| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 1155791 | Stochastic Processes and their Applications | 2011 | 38 Pages |
Abstract
We consider the effect of recovery rates on a pool of credit assets. We allow the recovery rate to depend on the defaults in a general way. Using the theory of large deviations, we study the structure of losses in a pool consisting of a continuum of types. We derive the corresponding rate function and show that it has a natural interpretation as the favored way to rearrange recoveries and losses among the different types. Numerical examples are also provided.
Related Topics
Physical Sciences and Engineering
Mathematics
Mathematics (General)
Authors
Konstantinos Spiliopoulos, Richard B. Sowers,