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The Distribution of Loan Portfolio Value

by Oldrich Alfons Vasicek of KMV

December 2002

Abstract: In this paper, we derive the distribution of the portfolio loss under certain assumptions. It is shown that this distribution converges with increasing portfolio size to a limiting type, whose analytical form is given here. The results of the first two sections of this paper are contained in the author's technical notes, Vasicek (1987) and (1991). For a review of recent literature on the subject, see, for instance, Pykhtin and Dev (2002) * .

* Pykhtin, Michael and Ashish Dev, "Analytical Approach to Credit Risk Modelling", RISK, Vol. 15, No. 3, (March 2002), pp. S26-S32.

Published in: RISK, Vol. 15, No. 12, (December 2002), pp. 160-162.

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