Difference between revisions of "Vasicek Distribution"
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Latest revision as of 19:39, 23 March 2020
Definition
The Vasicek Distribution is a special probability distribution that emerges in the context of Threshold Models used in credit portfolio modelling. It was first introduced in^{[1]}. There are two versions, the finite portfolio case and its limiting case wher the number of exposures in a portfolio assumed infinitely many / infinitely small.
Finite Portfolio Case
In the finite case the probability mass of D=k defaults out of a pool of N credits with equal probability of default p is
where G(z) denotes the inverse cumulative distribution function
Limit Case
The limit case arrises as a limit distribution of the sum of conditionally independent Bernulli variables
Usage
Used extensively in as a simple model of portfolio loss (also in Basel II as the ASRF model)