Risk aggregation and Extreme Events [41]

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Bullet points include: As n , probability of less than s n - = successes goes to zero and probability of more than s n +   goes to 1, for any  > 0 (law of large numbers) Hence: Has been employed by Gordy for designing capital charges for loans in Basel II context Also used in modelling structured products, loan losses etc. C.f. market-implied correlation for CDOs etc.

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