Basel II: Numerical instabilities to stabilize banks?

[DrDu]

Oops, I was to quick here. At least, there is no instability. Nevertheless I would write
$\mathrm{Corr}(R)=0.12(1+\exp(-50 \mathrm{PD}))$ instead of
Correlation (R) =
0.12 × (1 – EXP (-50 × PD)) / (1 – EXP (-50)) +
0.24 × [1 - (1 - EXP(-50 × PD))/(1 - EXP(-50))]

 

[Doug Huffman]

Retired quant polymath N. N. Taleb argues, better fragile financials than robust 'bubbles' too big to fail or allow to burst.