In this paper, a recursive model, which is easily realized by programming, is deduced to estimate the loss of the portfolio with concentrated exposures. As an application of this model, the impact on portfolio loss by the concentration of the asset's exposure is studied from the perspective of VaR and economic capital. Under the condition that all assets' default probabilities are the same, for the portfolio with high credit quality,the loss risk does not increase and the economic capital for portfolio loss decreases on the contrary when the exposures are more concentrated. But for the portfolio with median credit quality, the loss risk and the economic capital increase when the exposure concentration increases. For this sort of portfolio, if the exposure becomes more dispersed and this dispersion is evener, the loss risk of the portfolio and the economic capital would become smaller.
詹原瑞, 王国栋. 违约暴露集中信用组合的违约损失研究[J]. J4, 2010, 7(5): 760-.
ZHAN Yuan-Rui, WANG Guo-Dong. Study on Default Loss of Credit Portfolios with Concentrated Exposures. J4, 2010, 7(5): 760-.