When measuring credit risk, we are particularly interested in dependencies between certain extreme credit events. In connection with the LTCM case the Business Week stated in September 1998:
Extreme, synchronized rises and falls in financial markets occur infrequently but they do occur. The problem with the models is that they did not assign a high enough chance of occurrence to the scenario in which many things go wrong at the same time – the “perfect storm” scenario.
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© 2009 Springer-Verlag Berlin Heidelberg
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(2009). Introduction. In: Concentration Risk in Credit Portfolios. EAA Lecture Notes. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-70870-4_7
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