An indirect view from the saddle

The construction of the distribution of losses, or of the profit and loss, of a portfolio of assets is a well-established problem. Particularly for credit, where the distribution is used in risk management and portfolio optimisation (Martin, 2004), and in the valuation of correlation-dependent credit derivatives such as collateralised debt obligations (CDOs) (Andersen, Sidenius & Basu, 2003), the distributions involved are highly asymmetrical and this has brought about a new generation of