Explanation

Credit Risk Plus (CreditRisk+) is the correct answer because it focuses specifically on estimating default losses using individual firm default probabilities without explicitly modeling default correlation. This approach:

• Models default as a Poisson process - treats defaults as independent events
• Uses insurance industry principles - similar to how insurance companies model claims
• Does not explicitly model correlation - unlike other models that incorporate correlation structures
• Focuses solely on default events - rather than credit migrations or rating changes

Why other options are incorrect:

• A. Vasicek's Model: Explicitly models default correlation using a Gaussian copula framework
• C. Credit Metrics: Integrates both default probabilities AND credit migrations, using correlation structures
• D. Gordy's extension: Builds on Vasicek's model and explicitly incorporates correlation for regulatory capital

CreditRisk+ is designed specifically for portfolio credit risk where the primary concern is default events, making it the most appropriate choice for estimating default losses without explicit correlation modeling.