We develop a dynamic point process model of correlated default timing in a
portfolio of firms, and analyze typical default profiles in the limit as the
size of the pool grows. In our model, a firm defaults at a stochastic intensity
that is influenced by an idiosyncratic risk process, a systematic risk process
common to all firms, and past defaults. We prove a law of large numbers for the
default rate in the pool, which describes the "typical" behavior of defaults.Comment: Published in at http://dx.doi.org/10.1214/12-AAP845 the Annals of
Applied Probability (http://www.imstat.org/aap/) by the Institute of
Mathematical Statistics (http://www.imstat.org
