Collaboration with Lorenzo Savoia of the Politecnico di Milano

Default Probability (%)

Number Loans

Tranche Attach (%)

We apply the Vasicek Credit Default Distribution and an Extended Vasicek Distribution ("XLPA") to the calculation of Tranche Expected Loss in a simplified structured credit transaction with many assumptions. See the article "Extending the Large Pool Approximation" for detailed explanation of the XLPA.

Vasicek XLPA

Probability of Loss (%)Expected Loss (% of Tranche)