In common portfolio theory1, a significant reduction of risk is expected when\ninvestments are split into two or more positions. A lower correlation between\npositions results in a higher risk-reducing portfolio effect. The credit risk of a\nportfolio is dependent on the default risk of all its issuers. By investing in two\ndifferent debtors instead of only one, the probability of the total loss is significantly\nreduced and a debtor concentration is prevented. Concentration\nrisk can be reduced by diversifying the portfolio. How can concentration risk\nbe defined in a quantitative way? The aim of this paper is to determine a key\nfigure, which makes concentration risk measurable.
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