Credit risk meets insurance risk: a unified framework

This paper introduces a continuous-time extension to the influential CreditRisk+ model for portfolio credit risk modeling. For capital calculations it introduces a risk measure based on the maximum of the loss process of a portfolio over a specified time interval. An extensive numerical study demonstrates that this extension provides an accurate risk assessment. The new framework has many advantages. First, it enables loss evaluation over a continuous time period rather than at a fixed point in time as in the original CreditRisk+ model. Second, the framework offers great flexibility, for example, for the incorporation of collateral risks, interest income and