RT Journal Article
SR Electronic
T1 Impact of Correlated Default Risk on Credit Portfolios
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 9
OP 19
DO 10.3905/jfi.2001.319301
VO 11
IS 3
A1 Das, Sanjiv Ranjan.
A1 Fong, H. Gifford
A1 Geng, Gary
YR 2001
UL http://jfi.pm-research.com/content/11/3/9.abstract
AB Markets are evidencing increasing systemic risk, and the credit market is no exception. Correlated default is thus an important feature models must account for in credit portfolios. To complement the growing literature on theoretical models to capture correlated default, the authors explore the implications of correlated default for credit portfolios. Ex ante default probabilities are found to be strongly correlated, and regime-dependent; ignoring these features understates the risk profile of credit portfolios. Rating agencies must include correlated default in their analysis of debt pools.