Ad-Hoc Measures of Concentration

Before we start to discuss different model-based methods to measure concentration risk in credit portfolios in the following chapters, we will first give a brief overview of some simple ad-hoc measures for concentration risk. We will discuss the advantages and drawbacks of these measures based on a set of desirable properties which ensure a consistent measurement of concentration risk. These properties are taken from [53] and [78], originally coming from the theory of concentrations in industry. A detailed study of ad-hoc measures based on these properties can be found in [17] who also translated them to the context of concentrations in credit portfolios.