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Model-Based Measurement of Name Concentration Risk in Credit Portfolios

In: Risk Management in Credit Portfolios

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  • Martin Hibbeln

    (Technische Universität Braunschweig)

Abstract

This chapter deals with the measurement of name concentrations. This type of concentration risk occurs if the weight of single credits in the portfolio does not converge to zero; thus, the individual risk component cannot be completely diversified. The main research questions on name concentrations that are considered in this chapter are: In which cases are the assumptions of the ASRF framework critical concerning the credit portfolio size? In which cases are currently discussed adjustments for the VaR-measurement able to overcome the shortcomings of the ASRF model? Concerning the first question, it is analyzed how many credits are at least necessary implying the neglect of undiversified individual risk not to be problematic. Since there exist analytical formulas – the so-called granularity adjustment – which approximate these risks, it is further determined in which cases these formulas are able to lead to desired results.

Suggested Citation

  • Martin Hibbeln, 2010. "Model-Based Measurement of Name Concentration Risk in Credit Portfolios," Contributions to Economics, in: Risk Management in Credit Portfolios, chapter 0, pages 73-182, Springer.
    • Handle: RePEc:spr:conchp:978-3-7908-2607-4_4
    DOI: 10.1007/978-3-7908-2607-4_4
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