Credit risk measurement

Jacob Paroush

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


Supervisory authorities regulate banks by limiting simple and weighted capital-assets ratios as well as the maximum loan granted to a single borrower. These measures are taken mainly to prevent financial intermediaries from bearing excessive credit risk. The purpose of this paper is twofold; first to construct a model within which the customary use of these tools would be justified and, second, within the same theoretical framework, to offer a measure of the total exposure of a bank to credit risk. An interesting finding is that the Herfindahl-Hirschman coefficient of concentration is the most appropriate measure of diversification of banks' portfolios.

Original languageEnglish
Pages (from-to)33-41
Number of pages9
JournalInternational Review of Economics and Finance
Issue number1
StatePublished - 1992


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