P2.T6. Credit Risk (25%)

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  1. Nicole Seaman
    Sticky

    Errors Found in Study Notes P2.T6. Credit Risk

    Hi @olgenue Yes, exactly. I actually did notice this too, along with several other errors in the new Giacomo (e.g., the Merton model is wrong too). We have emailed the authors and the publisher to request/input on an errata, but we have not received any replies. Because it's a new reading, I didn't want to risk making my own edits. The source is below, hopefully you'll agree our note does...
    Hi @olgenue Yes, exactly. I actually did notice this too, along with several other errors in the new Giacomo (e.g., the Merton model is wrong too). We have emailed the authors and the publisher to request/input on an errata, but we have not received any replies. Because it's a new reading, I didn't want to risk making my own edits. The source is below, hopefully you'll agree our note does...
    Hi @olgenue Yes, exactly. I actually did notice this too, along with several other errors in the new Giacomo (e.g., the Merton model is wrong too). We have emailed the authors and the publisher to request/input on an errata, but we have not received any replies. Because it's a new reading, I...
    Hi @olgenue Yes, exactly. I actually did notice this too, along with several other errors in the new Giacomo (e.g., the Merton model is wrong too). We have emailed the authors and the publisher to...
    Replies:
    10
    Views:
    930
  2. no_ming

    GARP.FRM.PQ.P2 2016 GARP PQ - Question 5 - CDS (garp16-p2-5)

    If so, I'd like to know how the PV of the premium leg above relates to this formula:
    If so, I'd like to know how the PV of the premium leg above relates to this formula:
    If so, I'd like to know how the PV of the premium leg above relates to this formula:
    If so, I'd like to know how the PV of the premium leg above relates to this formula:
    upload_2017-3-22_18-34-2.png
    Replies:
    8
    Views:
    365
  3. brunnim

    Credit Risk in 2014

    12. A trader observes a quote for Stock ZZZ, and the midpoint of its current best bid and best ask prices is CAD 35. ZZZ has an estimated daily return volatility of 0.25% and average bid-ask spread of CAD 0.1. Assuming the returns of ZZZ are normally distributed, what is closest to the estimated liquidity-adjusted, 1-day 95% VaR, using the constant spread approach on a 10,000 share...
    12. A trader observes a quote for Stock ZZZ, and the midpoint of its current best bid and best ask prices is CAD 35. ZZZ has an estimated daily return volatility of 0.25% and average bid-ask spread of CAD 0.1. Assuming the returns of ZZZ are normally distributed, what is closest to the estimated liquidity-adjusted, 1-day 95% VaR, using the constant spread approach on a 10,000 share...
    12. A trader observes a quote for Stock ZZZ, and the midpoint of its current best bid and best ask prices is CAD 35. ZZZ has an estimated daily return volatility of 0.25% and average bid-ask spread of CAD 0.1. Assuming the returns of ZZZ are normally distributed, what is closest to the estimated...
    12. A trader observes a quote for Stock ZZZ, and the midpoint of its current best bid and best ask prices is CAD 35. ZZZ has an estimated daily return volatility of 0.25% and average bid-ask...
    Replies:
    10
    Views:
    1,097
  4. bpdulog

    Stulz Ch 18 - Total Return Swap

    Hi all, Can someone explain why the bank gets paid whether or not the bank defaults or not? They receive $20 million, which is the difference between the value at maturity and the value of the debt at t=0. If the debt defaults, they get $30 million which is the difference betweeen the value at the time of credit event and the value at t=0. I understand why the bank gets paid if there is a...
    Hi all, Can someone explain why the bank gets paid whether or not the bank defaults or not? They receive $20 million, which is the difference between the value at maturity and the value of the debt at t=0. If the debt defaults, they get $30 million which is the difference betweeen the value at the time of credit event and the value at t=0. I understand why the bank gets paid if there is a...
    Hi all, Can someone explain why the bank gets paid whether or not the bank defaults or not? They receive $20 million, which is the difference between the value at maturity and the value of the debt at t=0. If the debt defaults, they get $30 million which is the difference betweeen the value...
    Hi all, Can someone explain why the bank gets paid whether or not the bank defaults or not? They receive $20 million, which is the difference between the value at maturity and the value of the...
    upload_2017-3-19_22-17-10.png
    Replies:
    0
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    36
  5. rajeshtr

    CDS - Bond basis factors : confusing impact

    @rajeshtr Can I refer you to my absolutely favorite book on this topic: The Credit Default Swap Basis by Moorad Choudhry Below I copied the key section on the factors. I think it's more helpful than Gregory's section on CDS-Bond basis precisely because of your point: Choudry does give a framework. He starts at the very beginning which is to distinguish the unfunded CDS from the funded asset...
    @rajeshtr Can I refer you to my absolutely favorite book on this topic: The Credit Default Swap Basis by Moorad Choudhry Below I copied the key section on the factors. I think it's more helpful than Gregory's section on CDS-Bond basis precisely because of your point: Choudry does give a framework. He starts at the very beginning which is to distinguish the unfunded CDS from the funded asset...
    @rajeshtr Can I refer you to my absolutely favorite book on this topic: The Credit Default Swap Basis by Moorad Choudhry Below I copied the key section on the factors. I think it's more helpful than Gregory's section on CDS-Bond basis precisely because of your point: Choudry does give a...
    @rajeshtr Can I refer you to my absolutely favorite book on this topic: The Credit Default Swap Basis by Moorad Choudhry Below I copied the key section on the factors. I think it's more helpful...
    Replies:
    1
    Views:
    87
  6. rajeshtr

    Dividing CVA by Duration --> gives Credit Spread

    Hi @rajeshtr I haven't looked at that closely but it actually does offer a bit of intuition because I see that earlier Gregory suggests we can also (additionally? alternatively?) divide by the "risky annuity" the following (emphasis mine): I don't see the calculation for the "risky duration" but at least directionally it makes sense to me given the reference to risky annuity (which connotes...
    Hi @rajeshtr I haven't looked at that closely but it actually does offer a bit of intuition because I see that earlier Gregory suggests we can also (additionally? alternatively?) divide by the "risky annuity" the following (emphasis mine): I don't see the calculation for the "risky duration" but at least directionally it makes sense to me given the reference to risky annuity (which connotes...
    Hi @rajeshtr I haven't looked at that closely but it actually does offer a bit of intuition because I see that earlier Gregory suggests we can also (additionally? alternatively?) divide by the "risky annuity" the following (emphasis mine): I don't see the calculation for the "risky duration"...
    Hi @rajeshtr I haven't looked at that closely but it actually does offer a bit of intuition because I see that earlier Gregory suggests we can also (additionally? alternatively?) divide by the...
    Replies:
    1
    Views:
    47
  7. rajeshtr

    Spot rate Vs Swap rate..

    Hi David, In Malz material Example 7.7 - the material reads "We assume a flat swap curve for all maturities : with a continuously compounded spot rate of 4.5%" so the swap rate is assumed to be close to spot rate and hence it is 4.5% in the below equation : how do you easily spot whether this is spot rate or Swap rate.. (Is it because it is positive i.e. swap rate (equating to bond price) )...
    Hi David, In Malz material Example 7.7 - the material reads "We assume a flat swap curve for all maturities : with a continuously compounded spot rate of 4.5%" so the swap rate is assumed to be close to spot rate and hence it is 4.5% in the below equation : how do you easily spot whether this is spot rate or Swap rate.. (Is it because it is positive i.e. swap rate (equating to bond price) )...
    Hi David, In Malz material Example 7.7 - the material reads "We assume a flat swap curve for all maturities : with a continuously compounded spot rate of 4.5%" so the swap rate is assumed to be close to spot rate and hence it is 4.5% in the below equation : how do you easily spot whether this...
    Hi David, In Malz material Example 7.7 - the material reads "We assume a flat swap curve for all maturities : with a continuously compounded spot rate of 4.5%" so the swap rate is assumed to be...
    upload_2017-3-4_10-59-47.png
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    0
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    70
  8. emilioalzamora1

    Retail vs. corporate credit default (time of default)

    Thank you @berrymucho those are good sources!
    Thank you @berrymucho those are good sources!
    Thank you @berrymucho those are good sources!
    Thank you @berrymucho those are good sources!
    Replies:
    12
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    171
  9. Rohit
    Replies:
    2
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    129
  10. farahm

    delaurentis - chapter 2 - recovery

    I have read it many times now and still not 100 percent sure. But I guess the main point he makes is that Recovery depends heavily on the jurisdiction and type of contract and that this information is lost if you look at a Recovery from a generalized or global point of view. So from a model perspective (regarding estimation of Recovery) it would be very hard to incorporate the specific...
    I have read it many times now and still not 100 percent sure. But I guess the main point he makes is that Recovery depends heavily on the jurisdiction and type of contract and that this information is lost if you look at a Recovery from a generalized or global point of view. So from a model perspective (regarding estimation of Recovery) it would be very hard to incorporate the specific...
    I have read it many times now and still not 100 percent sure. But I guess the main point he makes is that Recovery depends heavily on the jurisdiction and type of contract and that this information is lost if you look at a Recovery from a generalized or global point of view. So from a model...
    I have read it many times now and still not 100 percent sure. But I guess the main point he makes is that Recovery depends heavily on the jurisdiction and type of contract and that this...
    Replies:
    1
    Views:
    81
  11. Ekin4112

    CVA Questions

    To make it as simple as possible and to give you another practical example where is no upfront payment like in a long option position: 1) Suppose you are a Swap Dealer at a Banks Swap Desk. We assume there is no DVA. A client with lets say a BB rating wants to enter into a fixed rate payer swap. There is no CSA in place. To make the deal favorable for your desk you have to consider CVA. CVA...
    To make it as simple as possible and to give you another practical example where is no upfront payment like in a long option position: 1) Suppose you are a Swap Dealer at a Banks Swap Desk. We assume there is no DVA. A client with lets say a BB rating wants to enter into a fixed rate payer swap. There is no CSA in place. To make the deal favorable for your desk you have to consider CVA. CVA...
    To make it as simple as possible and to give you another practical example where is no upfront payment like in a long option position: 1) Suppose you are a Swap Dealer at a Banks Swap Desk. We assume there is no DVA. A client with lets say a BB rating wants to enter into a fixed rate payer...
    To make it as simple as possible and to give you another practical example where is no upfront payment like in a long option position: 1) Suppose you are a Swap Dealer at a Banks Swap Desk. We...
    Replies:
    13
    Views:
    567
  12. Linghan

    Learning spreadsheet P2.T6 Malz ch7

    @David Harper CFA FRM Thanks for clearify that!
    @David Harper CFA FRM Thanks for clearify that!
    @David Harper CFA FRM Thanks for clearify that!
    @David Harper CFA FRM Thanks for clearify that!
    Replies:
    2
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    93
  13. southeuro

    effect of default probability on equity and mezzanine

    Thanks @David Harper CFA FRM
    Thanks @David Harper CFA FRM
    Thanks @David Harper CFA FRM
    Thanks @David Harper CFA FRM
    Replies:
    15
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    1,341
  14. emilioalzamora1

    Cash-funded vs. syntethic CDO (borrower consent/notification)

    Hi All, I wanted to raise the following topic and share my insights about Cash-funded vs. syntethic CDO and whether one of these requires the borrower notification/obtaining borrower consent? This could be of one of these tricky questions in the exam (similarly engineered questions have turned up at the exam in Nov. 2016) David, it would be much appreciated if we can have your take on this?...
    Hi All, I wanted to raise the following topic and share my insights about Cash-funded vs. syntethic CDO and whether one of these requires the borrower notification/obtaining borrower consent? This could be of one of these tricky questions in the exam (similarly engineered questions have turned up at the exam in Nov. 2016) David, it would be much appreciated if we can have your take on this?...
    Hi All, I wanted to raise the following topic and share my insights about Cash-funded vs. syntethic CDO and whether one of these requires the borrower notification/obtaining borrower consent? This could be of one of these tricky questions in the exam (similarly engineered questions have turned...
    Hi All, I wanted to raise the following topic and share my insights about Cash-funded vs. syntethic CDO and whether one of these requires the borrower notification/obtaining borrower consent?...
    Replies:
    0
    Views:
    87
  15. arkabose

    VaR question (Part 2 exam - members put other question you can recall)

    I am stuck with this question too, I was thinking if 5% of loss on 25 loans (1% recovery rate) then that should be time 1.645 but the answer does not match!
    I am stuck with this question too, I was thinking if 5% of loss on 25 loans (1% recovery rate) then that should be time 1.645 but the answer does not match!
    I am stuck with this question too, I was thinking if 5% of loss on 25 loans (1% recovery rate) then that should be time 1.645 but the answer does not match!
    I am stuck with this question too, I was thinking if 5% of loss on 25 loans (1% recovery rate) then that should be time 1.645 but the answer does not match!
    Replies:
    1
    Views:
    221
  16. equanimity

    GARP Part 2 Questions 76 and 33 (garp16-p2-76) (garp16-p2-33)

    Just to add to the helpful comments already here: Question 76 is asking for the unconditional PD in year 4, which can be also answered by subtracting th 3-year cumulative PD from the 4-year cumulative PD: (1-5.5%)^4 - (1-5.5%)^3 = 4.64%. I like this calculation because to me it is somewhat intuitive: as the unconditional probability is the probability "from the perspective of today," if the...
    Just to add to the helpful comments already here: Question 76 is asking for the unconditional PD in year 4, which can be also answered by subtracting th 3-year cumulative PD from the 4-year cumulative PD: (1-5.5%)^4 - (1-5.5%)^3 = 4.64%. I like this calculation because to me it is somewhat intuitive: as the unconditional probability is the probability "from the perspective of today," if the...
    Just to add to the helpful comments already here: Question 76 is asking for the unconditional PD in year 4, which can be also answered by subtracting th 3-year cumulative PD from the 4-year cumulative PD: (1-5.5%)^4 - (1-5.5%)^3 = 4.64%. I like this calculation because to me it is somewhat...
    Just to add to the helpful comments already here: Question 76 is asking for the unconditional PD in year 4, which can be also answered by subtracting th 3-year cumulative PD from the 4-year...
    Replies:
    6
    Views:
    185
  17. arkabose

    Collateral can increase exposure?

    I think Gregory is just illustrating an outlier possibility related to "the need to post collateral and parameters such as minimum transfer amounts create some risk above the threshold." The portfolio value -15 implies this party has posted collateral but the collateral amount is not continously accurate (per MTA and other parameters) such that $18 has actually been posted and $3 is due to be...
    I think Gregory is just illustrating an outlier possibility related to "the need to post collateral and parameters such as minimum transfer amounts create some risk above the threshold." The portfolio value -15 implies this party has posted collateral but the collateral amount is not continously accurate (per MTA and other parameters) such that $18 has actually been posted and $3 is due to be...
    I think Gregory is just illustrating an outlier possibility related to "the need to post collateral and parameters such as minimum transfer amounts create some risk above the threshold." The portfolio value -15 implies this party has posted collateral but the collateral amount is not...
    I think Gregory is just illustrating an outlier possibility related to "the need to post collateral and parameters such as minimum transfer amounts create some risk above the threshold." The...
    Replies:
    1
    Views:
    90
  18. Johnny Firpo

    CDS and CDS Index long or short

    @David Harper CFA FRM , no probs! With the amount of hard work and support you are giving to this forum at this moment, little mistakes are not unexpected! :p :)
    @David Harper CFA FRM , no probs! With the amount of hard work and support you are giving to this forum at this moment, little mistakes are not unexpected! :p :)
    @David Harper CFA FRM , no probs! With the amount of hard work and support you are giving to this forum at this moment, little mistakes are not unexpected! :p :)
    @David Harper CFA FRM , no probs! With the amount of hard work and support you are giving to this forum at this moment, little mistakes are not unexpected! :p :)
    Replies:
    14
    Views:
    10,800
  19. shanlane

    Merton formula

    Hi @Arnaudc Okay, right, as I actually look at Malz currently, you are correct about his assumption in the first step (page 219). Sorry to misrepresent him on that, thank you for pushing back, I learned something here! :) (fwiw, my key influence is ) Malz page 219: "Example 6.3 (Merton Model): We apply the model to a firm that has an asset value of $140. We’ll assume the firm’s sole debt issue...
    Hi @Arnaudc Okay, right, as I actually look at Malz currently, you are correct about his assumption in the first step (page 219). Sorry to misrepresent him on that, thank you for pushing back, I learned something here! :) (fwiw, my key influence is ) Malz page 219: "Example 6.3 (Merton Model): We apply the model to a firm that has an asset value of $140. We’ll assume the firm’s sole debt issue...
    Hi @Arnaudc Okay, right, as I actually look at Malz currently, you are correct about his assumption in the first step (page 219). Sorry to misrepresent him on that, thank you for pushing back, I learned something here! :) (fwiw, my key influence is ) Malz page 219: "Example 6.3 (Merton Model): We...
    Hi @Arnaudc Okay, right, as I actually look at Malz currently, you are correct about his assumption in the first step (page 219). Sorry to misrepresent him on that, thank you for pushing back, I...
    Replies:
    10
    Views:
    1,482
  20. taunk

    P2.T6.309. Default correlation, Malz sections 8.1 and 8.2

    I am sorry. I goofed up. I had this question no. 74 in mind when I raised the query.
    I am sorry. I goofed up. I had this question no. 74 in mind when I raised the query.
    I am sorry. I goofed up. I had this question no. 74 in mind when I raised the query.
    I am sorry. I goofed up. I had this question no. 74 in mind when I raised the query.
    IMG-20161030-WA0002.jpg
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  21. frmqiu

    GARP.FRM.PQ.P2 hazard rate (garp16-p2-33)

    Hi @frmqiu Yes, the language in question 2016.P2.Q33 was reported earlier in the year as imprecise. I recall that GARP agreed with our feedback. @Deepak Chitnis is correct that the solution implicitly is the discrete conditional PD, but the phrasing suggests it wants a joint probability. Please see here for more detail
    Hi @frmqiu Yes, the language in question 2016.P2.Q33 was reported earlier in the year as imprecise. I recall that GARP agreed with our feedback. @Deepak Chitnis is correct that the solution implicitly is the discrete conditional PD, but the phrasing suggests it wants a joint probability. Please see here for more detail
    Hi @frmqiu Yes, the language in question 2016.P2.Q33 was reported earlier in the year as imprecise. I recall that GARP agreed with our feedback. @Deepak Chitnis is correct that the solution implicitly is the discrete conditional PD, but the phrasing suggests it wants a joint probability....
    Hi @frmqiu Yes, the language in question 2016.P2.Q33 was reported earlier in the year as imprecise. I recall that GARP agreed with our feedback. @Deepak Chitnis is correct that the solution...
    Replies:
    3
    Views:
    115
  22. The Great Khan

    Merton drift in DD

    Hi All, P2.T6.R43 I am trying to conceptually understand how the DD value is calculated statistically. The numerator is the expected value of the price, and the denominator is the standard deviation. My question relates to the numerator. Assume T-t=1 ln(Vo/K) is the current log "return" at T=0. We then add what I assume is the expected drift until maturity (r-(sig^2)/2). How am I supposed...
    Hi All, P2.T6.R43 I am trying to conceptually understand how the DD value is calculated statistically. The numerator is the expected value of the price, and the denominator is the standard deviation. My question relates to the numerator. Assume T-t=1 ln(Vo/K) is the current log "return" at T=0. We then add what I assume is the expected drift until maturity (r-(sig^2)/2). How am I supposed...
    Hi All, P2.T6.R43 I am trying to conceptually understand how the DD value is calculated statistically. The numerator is the expected value of the price, and the denominator is the standard deviation. My question relates to the numerator. Assume T-t=1 ln(Vo/K) is the current log "return" at...
    Hi All, P2.T6.R43 I am trying to conceptually understand how the DD value is calculated statistically. The numerator is the expected value of the price, and the denominator is the standard...
    Replies:
    0
    Views:
    113
  23. emilioalzamora1

    Total Return Swap (Crouhy) - Figure 12-7 - mistake?

    many thanks, David! Apologies,I was referring to Crouhy's first edition in my question (there it is Figure 12-7). Now it makes good sense.
    many thanks, David! Apologies,I was referring to Crouhy's first edition in my question (there it is Figure 12-7). Now it makes good sense.
    many thanks, David! Apologies,I was referring to Crouhy's first edition in my question (there it is Figure 12-7). Now it makes good sense.
    many thanks, David! Apologies,I was referring to Crouhy's first edition in my question (there it is Figure 12-7). Now it makes good sense.
    Replies:
    3
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    143
  24. arkabose

    MtM and Exposure for Netting

    Hi @arkabose Yes, agreed. Your circled item is from the source (Gregory) and it's not listed in his errata that I can see (). However, I agree with you. This looks like a mistake to me (sorry). Your second paragraph, of course, is CORRECT: in a fixed cross-currency swap, the counterparty who pays the higher interest rate has a positive expected future M2M; i.e., the higher relative rate, per...
    Hi @arkabose Yes, agreed. Your circled item is from the source (Gregory) and it's not listed in his errata that I can see (). However, I agree with you. This looks like a mistake to me (sorry). Your second paragraph, of course, is CORRECT: in a fixed cross-currency swap, the counterparty who pays the higher interest rate has a positive expected future M2M; i.e., the higher relative rate, per...
    Hi @arkabose Yes, agreed. Your circled item is from the source (Gregory) and it's not listed in his errata that I can see (). However, I agree with you. This looks like a mistake to me (sorry). Your second paragraph, of course, is CORRECT: in a fixed cross-currency swap, the counterparty who...
    Hi @arkabose Yes, agreed. Your circled item is from the source (Gregory) and it's not listed in his errata that I can see (). However, I agree with you. This looks like a mistake to me (sorry)....
    Replies:
    1
    Views:
    195
  25. Kaiser

    Netting factor

    Thanks vm for the confirmation David. Makes sense with this lower bound. Rgds,
    Thanks vm for the confirmation David. Makes sense with this lower bound. Rgds,
    Thanks vm for the confirmation David. Makes sense with this lower bound. Rgds,
    Thanks vm for the confirmation David. Makes sense with this lower bound. Rgds,
    Replies:
    2
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    213
  26. no_ming

    GARP.FRM.PQ.P2 2016 GARP PQ - Question 52 -Netting

    Hi @no_ming In this question, the type of instruments don't really matter as the question is giving you the mark-to-market value ("current market value";) of the positions. Credit exposure is max(value, 0). So the credit exposure here without netting is 54, but with netting it is only 21: Without netting: max(0, +21) + max(0, -33) + max(0, +33) = 54 With netting: max(0, 21 - 33 + 33) = 21
    Hi @no_ming In this question, the type of instruments don't really matter as the question is giving you the mark-to-market value ("current market value";) of the positions. Credit exposure is max(value, 0). So the credit exposure here without netting is 54, but with netting it is only 21: Without netting: max(0, +21) + max(0, -33) + max(0, +33) = 54 With netting: max(0, 21 - 33 + 33) = 21
    Hi @no_ming In this question, the type of instruments don't really matter as the question is giving you the mark-to-market value ("current market value";) of the positions. Credit exposure is max(value, 0). So the credit exposure here without netting is 54, but with netting it is only...
    Hi @no_ming In this question, the type of instruments don't really matter as the question is giving you the mark-to-market value ("current market value";) of the positions. Credit exposure is...
    Replies:
    1
    Views:
    185
  27. mh2452

    de Servigny, Chapter 3 - Spreadsheet

    Hello @mh2452 Any spreadsheets that are not published under the individual readings are published under that topic's Topic Review section in spreadsheet bundles. So if you to into Topic 6, you will find the spreadsheet bundles for that topic. I hope this helps! Nicole
    Hello @mh2452 Any spreadsheets that are not published under the individual readings are published under that topic's Topic Review section in spreadsheet bundles. So if you to into Topic 6, you will find the spreadsheet bundles for that topic. I hope this helps! Nicole
    Hello @mh2452 Any spreadsheets that are not published under the individual readings are published under that topic's Topic Review section in spreadsheet bundles. So if you to into Topic 6, you will find the spreadsheet bundles for that topic. I hope this helps! Nicole
    Hello @mh2452 Any spreadsheets that are not published under the individual readings are published under that topic's Topic Review section in spreadsheet bundles. So if you to into Topic 6, you...
    Replies:
    1
    Views:
    118
  28. no_ming

    PQ-external Excess spreads question~

    Hi @no_ming Your question is good because sometimes default is assumed to refer to only the principal (as your solution infers), however here (in my opinion) the question does specify "accumulates 6.625 mm of losses from defaults and unpaid interest." And, this is natural (yes?): losses should refer to both unpaid principal and unpaid interest. So, given the phrasing, appropriate would be...
    Hi @no_ming Your question is good because sometimes default is assumed to refer to only the principal (as your solution infers), however here (in my opinion) the question does specify "accumulates 6.625 mm of losses from defaults and unpaid interest." And, this is natural (yes?): losses should refer to both unpaid principal and unpaid interest. So, given the phrasing, appropriate would be...
    Hi @no_ming Your question is good because sometimes default is assumed to refer to only the principal (as your solution infers), however here (in my opinion) the question does specify "accumulates 6.625 mm of losses from defaults and unpaid interest." And, this is natural (yes?): losses should...
    Hi @no_ming Your question is good because sometimes default is assumed to refer to only the principal (as your solution infers), however here (in my opinion) the question does specify "accumulates...
    Replies:
    3
    Views:
    185
  29. no_ming

    PFE & EE Question~

    @no_ming Re: In another word, not only EE, if Sigma and mean increase, PFE, EPE etc. also increase, is that right? Yes, if you increase µ or σ then you are shifting or "expanding" (dispersing) the normal distribution, so the x% PFE will increase, in the same way that higher volatility or lower return will increase (absolute) value at risk because there x% tail (quantile) is further into loss...
    @no_ming Re: In another word, not only EE, if Sigma and mean increase, PFE, EPE etc. also increase, is that right? Yes, if you increase µ or σ then you are shifting or "expanding" (dispersing) the normal distribution, so the x% PFE will increase, in the same way that higher volatility or lower return will increase (absolute) value at risk because there x% tail (quantile) is further into loss...
    @no_ming Re: In another word, not only EE, if Sigma and mean increase, PFE, EPE etc. also increase, is that right? Yes, if you increase µ or σ then you are shifting or "expanding" (dispersing) the normal distribution, so the x% PFE will increase, in the same way that higher volatility or lower...
    @no_ming Re: In another word, not only EE, if Sigma and mean increase, PFE, EPE etc. also increase, is that right? Yes, if you increase µ or σ then you are shifting or "expanding" (dispersing) the...
    Replies:
    8
    Views:
    234
  30. no_ming

    PQ-external CVA & credit limit question:

    Mr. Harper, very clear explanation , thanks a lot. Dr. Jayanthi Sankaran, also thanks for your help.:)
    Mr. Harper, very clear explanation , thanks a lot. Dr. Jayanthi Sankaran, also thanks for your help.:)
    Mr. Harper, very clear explanation , thanks a lot. Dr. Jayanthi Sankaran, also thanks for your help.:)
    Mr. Harper, very clear explanation , thanks a lot. Dr. Jayanthi Sankaran, also thanks for your help.:)
    Replies:
    3
    Views:
    197
  31. afterworkguinness

    Equity tranche spread wrt correlation

    Hello Sir, Can you please help me with the below question Question 1 Part a) Consider the following assets present in loan portfolio of IMT Bank Ltd, all the assets below are mortgage loans. Exposure 1 Exposure 2 Exposure 3 Portfolio Commitment $100,000,000 $120,000,000 ...
    Hello Sir, Can you please help me with the below question Question 1 Part a) Consider the following assets present in loan portfolio of IMT Bank Ltd, all the assets below are mortgage loans. Exposure 1 Exposure 2 Exposure 3 Portfolio Commitment $100,000,000 $120,000,000 ...
    Hello Sir, Can you please help me with the below question Question 1 Part a) Consider the following assets present in loan portfolio of IMT Bank Ltd, all the assets below are mortgage loans. Exposure 1 Exposure 2 Exposure 3 ...
    Hello Sir, Can you please help me with the below question Question 1 Part a) Consider the following assets present in loan portfolio of IMT Bank Ltd, all the assets below are mortgage loans. ...
    Replies:
    8
    Views:
    2,082

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