Before revision: We consider a structural model for the estimation of credit risk based on Merton's original model . By using Random Matrix Theory we demonstrate analytically that the presence of correlations severely limits the effect of diversification in a credit portfolio if the correlations are not identically zero.
After revision: We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory we demonstrate analytically that the presence of correlations severely limits the effect of diversification in a credit portfolio if the correlations are not identically zero.