Sample-path large deviations in credit risk

The event of large losses plays an important role in credit risk. as these large losses are typically rare,and portfolios usually consist of a large number of positions,large deviation theory is the natural tool to analyze the tail asymptotics of the probabilities involved. we first derive a sample-path large deviation principle (ldp) for the portfolio's loss process,which enables the computation of the logarithmic decay rate of the probabilities of interest. in addition,we derive exact asymptotic results for a number of specific rare-event probabilities,such as the probability of the loss process exceeding some given function. copyright © 2011 v. j. g. leijdekker et al.