Large Portfolio Losses

Amir Dembo, Jean-Deominique Deuschel and Darrell Duffie

No 9177, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provide a large-deviations approximation of the tail distribution of total financial losses on a portfolio consisting of many positions. Applications include the total default losses on a bank portfolio, or the total claims against an insurer. The results may be useful in allocating exposure limits, and in allocating risk capital across different lines of business. Assuming that, for a given total loss, the distress caused by the loss is larger if the loss occurs within a smaller time period, we provide a large-deviations estimate of the likelihood that there will exist a sub-period of the future planning period during which a total loss of the critical severity occurs. Under conditions, this calculation is reduced to the calculation of the likelihood of the same sized loss over a fixed initial time interval whose length is a property of the portfolio and the critical loss level.

Date: 2002-09
New Economics Papers: this item is included in nep-fmk and nep-rmg
Note: AP
References: View complete reference list from CitEc
Citations:

Published as Dembo, Amir, Jean-Dominique Deuschel and Darrell Duffie. "Large Portfolio Losses," Finance and Stochastics, 2004, v8(1), 3-16.

Downloads: (external link)
http://www.nber.org/papers/w9177.pdf (application/pdf)

Related works:
Journal Article: Large portfolio losses (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:9177

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9177

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().