Binomial approximation and large deviations for defaults

From papers

Let DnD_n be the total number of defaults among nn banks, and let pp be the corresponding asymptotic default probability. Default-count conjecture. The random variable DnD_n should be approximately binomially distributed with parameters nn and pp, and large-deviation estimates for a binomial distribution should apply to DnD_n. This would permit rare-event probabilities for systemic defaults to be estimated through binomial large-deviation theory. The source does not specify a precise mode of approximation or establish the claimed large-deviation principle.

Progress summary

Nothing recorded yet. Refresh searches the literature and the public web for attempts on this problem, and writes the first summary here.

Sources & referencesView supporting material

Primary source

Veeraruna Kavitha, Indrajit Saha and Sandeep Juneja, “Random Fixed Points, Limits and Systemic risk”, arXiv:1809.05243 (2021).

Solutions 0

No solutions have been posted yet.