Correlated Binomial Distributions !


Number of Bonds in Pool (<25)  

Individual Bond Default Probability  

Default Correlation  

We consider here three distinct methods for generating correlated binomial distributions of bond defaults within a portfolio of arbitrary size. This paper defines the three methods and explains the historical importance and context. The article also explains the varying strengths and weaknesses of the alternatives. (The link takes you to a temporary page until our article is published.)

Bonds in Default Moody's Shifting PD MBC