Before revision:  We prove a law of large numbers for the default rate in the pool, which describes the "typical" behavior of defaults . Large deviation arguments are then used to identify the way that atypically large (i.e., "rare") default clusters are most likely to occur. Our results give insights into how different sources of default correlation interact to generate excessive portfolio losses .
After revision:  We prove a law of large numbers for the default rate in the pool, which describes the "typical" behavior of defaults .