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P2.T6. Credit Risk (25%)
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Errors Found in Study Notes P2.T6. Credit Risk
@silver7 I apologize but the Study Note appears to have a typo (it has been a struggle to cope with all of the different CVA assignments). cc @Nicole Seaman. The Study note page 13 should read "... so the probability that the counterparty has survived must enter into the calculation as S(n)." Question 708.3 is correct: S(I) is the survival probability of the institution and S(n) is the...
@silver7 I apologize but the Study Note appears to have a typo (it has been a struggle to cope with all of the different CVA assignments). cc @Nicole Seaman. The Study note page 13 should read "... so the probability that the counterparty has survived must enter into the calculation as S(n)." Question 708.3 is correct: S(I) is the survival probability of the institution and S(n) is the...
@silver7 I apologize but the Study Note appears to have a typo (it has been a struggle to cope with all of the different CVA assignments). cc @Nicole Seaman. The Study note page 13 should read "... so the probability that the counterparty has survived must enter into the calculation as...
@silver7 I apologize but the Study Note appears to have a typo (it has been a struggle to cope with all of the different CVA assignments). cc @Nicole Seaman. The Study note page 13 should read...
Nicole Seaman
,
Aug 5, 2015
...
2
Replies:
30
Views:
1,629
David Harper CFA FRM
May 17, 2018
FRM Practice Exam Part II Nov 2017
It is discussed in free resources topic 6 for 2016-GARP-Q5 (same question than 2017-Q5 and same idea but with different inputs) Oldfed
It is discussed in free resources topic 6 for 2016-GARP-Q5 (same question than 2017-Q5 and same idea but with different inputs) Oldfed
It is discussed in free resources topic 6 for 2016-GARP-Q5 (same question than 2017-Q5 and same idea but with different inputs) Oldfed
It is discussed in free resources topic 6 for 2016-GARP-Q5 (same question than 2017-Q5 and same idea but with different inputs) Oldfed
Unusualskill
,
May 18, 2018
Replies:
2
Views:
76
oldfed
May 18, 2018
CDS - Bond basis factors : confusing impact
Hi David, In which category would the bond squeeze go? I don’t see it mentioned? The closest is perhaps shortage in cash market, but this suggests positive basis? I thought Gregory says this is negative? Thanks for clarifying!
Hi David, In which category would the bond squeeze go? I don’t see it mentioned? The closest is perhaps shortage in cash market, but this suggests positive basis? I thought Gregory says this is negative? Thanks for clarifying!
Hi David, In which category would the bond squeeze go? I don’t see it mentioned? The closest is perhaps shortage in cash market, but this suggests positive basis? I thought Gregory says this is negative? Thanks for clarifying!
Hi David, In which category would the bond squeeze go? I don’t see it mentioned? The closest is perhaps shortage in cash market, but this suggests positive basis? I thought Gregory says this is...
rajeshtr
,
Mar 9, 2017
Replies:
2
Views:
906
luxsns@gmail.com
May 17, 2018
Relationships between default probability and VaR (Malz,Chapter 9)
@David Harper CFA FRM Can help with this question? thx!
@David Harper CFA FRM Can help with this question? thx!
@David Harper CFA FRM Can help with this question? thx!
@David Harper CFA FRM Can help with this question? thx!
Unusualskill
,
May 14, 2018
Replies:
3
Views:
63
Unusualskill
May 16, 2018
Computing default probability
Thanks @David Harper CFA FRM I think I finally understand the "as seen today". So Conditional (aka Marginal) PD is a combination of assumed certainty and probability: e.g. We assume we are certain you haven't defaulted in the first 3 years, and are calculating the probability of you defaulting in the 4th given we know you didn't default in the first 3 years. Possible outcomes: You can...
Thanks @David Harper CFA FRM I think I finally understand the "as seen today". So Conditional (aka Marginal) PD is a combination of assumed certainty and probability: e.g. We assume we are certain you haven't defaulted in the first 3 years, and are calculating the probability of you defaulting in the 4th given we know you didn't default in the first 3 years. Possible outcomes: You can...
Thanks @David Harper CFA FRM I think I finally understand the "as seen today". So Conditional (aka Marginal) PD is a combination of assumed certainty and probability: e.g. We assume we are certain you haven't defaulted in the first 3 years, and are calculating the probability of you defaulting...
Thanks @David Harper CFA FRM I think I finally understand the "as seen today". So Conditional (aka Marginal) PD is a combination of assumed certainty and probability: e.g. We assume we are...
Kavita.bhangdia
,
Apr 23, 2016
Replies:
7
Views:
996
Karim_B
May 16, 2018
Gregory, Chapter 8 (PFE)
under a simple assumption where the yield is i.i.d. (such that yield volatility scales with the square root of time), mathematically it peaks at exactly one-third (1/3rd) its tenor (life); the local maximum is the solution to a differentiation. It goes up (amortizes) due to the rate uncertainty, but then down (diffuses) because there is no principal at risk (exchanged).
under a simple assumption where the yield is i.i.d. (such that yield volatility scales with the square root of time), mathematically it peaks at exactly one-third (1/3rd) its tenor (life); the local maximum is the solution to a differentiation. It goes up (amortizes) due to the rate uncertainty, but then down (diffuses) because there is no principal at risk (exchanged).
under a simple assumption where the yield is i.i.d. (such that yield volatility scales with the square root of time), mathematically it peaks at exactly one-third (1/3rd) its tenor (life); the local maximum is the solution to a differentiation. It goes up (amortizes) due to the rate uncertainty,...
under a simple assumption where the yield is i.i.d. (such that yield volatility scales with the square root of time), mathematically it peaks at exactly one-third (1/3rd) its tenor (life); the...
Unusualskill
,
May 15, 2018
Replies:
1
Views:
35
David Harper CFA FRM
May 15, 2018
Gregory: CVA
I think CVA should be lower for an upward-sloping credit spread curve in the first periods of the life of the transaction (where credit spreads on the downward slope curve are still above the upward slope curve) -> in this case marginal default probabilieties would be higher using the downward slope curve and given that CVA is LGDxEExPD(t,t-1) the CVA from downward sloping curve would be...
I think CVA should be lower for an upward-sloping credit spread curve in the first periods of the life of the transaction (where credit spreads on the downward slope curve are still above the upward slope curve) -> in this case marginal default probabilieties would be higher using the downward slope curve and given that CVA is LGDxEExPD(t,t-1) the CVA from downward sloping curve would be...
I think CVA should be lower for an upward-sloping credit spread curve in the first periods of the life of the transaction (where credit spreads on the downward slope curve are still above the upward slope curve) -> in this case marginal default probabilieties would be higher using the downward...
I think CVA should be lower for an upward-sloping credit spread curve in the first periods of the life of the transaction (where credit spreads on the downward slope curve are still above the...
MSharky
,
Mar 20, 2016
Replies:
6
Views:
720
georgi
May 15, 2018
Malz Chapter 8:Portfolio Credit Risk
Hi @trivzca I moved your question to this thread. Below is a screenshot of Malz Table 8.1 (here is the XLS ) Similar to the above discussion, I retrieved 28 defaults with =BINOM.INV(1000, 0.02, 0.950) = 28.0, which is an inverse cumulative binomial distribution; i.e., under a binomial distribution with n = 1,000 and p = 2.0%, the 95.0% cumulative probability "falls on" the quantile at 28...
Hi @trivzca I moved your question to this thread. Below is a screenshot of Malz Table 8.1 (here is the XLS ) Similar to the above discussion, I retrieved 28 defaults with =BINOM.INV(1000, 0.02, 0.950) = 28.0, which is an inverse cumulative binomial distribution; i.e., under a binomial distribution with n = 1,000 and p = 2.0%, the 95.0% cumulative probability "falls on" the quantile at 28...
Hi @trivzca I moved your question to this thread. Below is a screenshot of Malz Table 8.1 (here is the XLS ) Similar to the above discussion, I retrieved 28 defaults with =BINOM.INV(1000, 0.02, 0.950) = 28.0, which is an inverse cumulative binomial distribution; i.e., under a binomial...
Hi @trivzca I moved your question to this thread. Below is a screenshot of Malz Table 8.1 (here is the XLS ) Similar to the above discussion, I retrieved 28 defaults with =BINOM.INV(1000, 0.02,...
kik92
,
Jun 4, 2017
Replies:
10
Views:
405
David Harper CFA FRM
May 11, 2018
CVA increase/decrease with Credit spread
@maga If we use Gregory's (2nd edition) notation, then the essential relationship is: Risky value = RF value - bCVA = Rf value - (CVA - DVA). It's important to be really careful who is who, but I'll assume "we are the Bank" and we are calculating the Risky value for ourselves such that our credit exposure is the Counterparty. In the unilateral case, of course, an increase in CVA is greater...
@maga If we use Gregory's (2nd edition) notation, then the essential relationship is: Risky value = RF value - bCVA = Rf value - (CVA - DVA). It's important to be really careful who is who, but I'll assume "we are the Bank" and we are calculating the Risky value for ourselves such that our credit exposure is the Counterparty. In the unilateral case, of course, an increase in CVA is greater...
@maga If we use Gregory's (2nd edition) notation, then the essential relationship is: Risky value = RF value - bCVA = Rf value - (CVA - DVA). It's important to be really careful who is who, but I'll assume "we are the Bank" and we are calculating the Risky value for ourselves such that our...
@maga If we use Gregory's (2nd edition) notation, then the essential relationship is: Risky value = RF value - bCVA = Rf value - (CVA - DVA). It's important to be really careful who is who, but...
Kavita.bhangdia
,
Feb 29, 2016
Replies:
12
Views:
2,286
David Harper CFA FRM
May 7, 2018
Conditional PD - GARP practice question # 10 (2015)
Hi @Karim_B Howabout (per the tag)? We do have a lot of these threads ... @Nicole Seaman can you see what we've got, ayc, thanks?
Hi @Karim_B Howabout (per the tag)? We do have a lot of these threads ... @Nicole Seaman can you see what we've got, ayc, thanks?
Hi @Karim_B Howabout (per the tag)? We do have a lot of these threads ... @Nicole Seaman can you see what we've got, ayc, thanks?
Hi @Karim_B Howabout (per the tag)? We do have a lot of these threads ... @Nicole Seaman can you see what we've got, ayc, thanks?
afterworkguinness
,
Nov 18, 2015
Replies:
6
Views:
1,133
David Harper CFA FRM
May 6, 2018
Basket Tranches value and risk
@David Harper CFA FRM Came across this post while studying. May I ask how would you explain this dynamic: Higher default correlation decreases the risk of the junior tranche. For my understanding, "higher default correlation increases the risk of the senior tranche", I explain using this idea: When there is a higher possibility of defaulting together for junior and senior tranche. Thus,...
@David Harper CFA FRM Came across this post while studying. May I ask how would you explain this dynamic: Higher default correlation decreases the risk of the junior tranche. For my understanding, "higher default correlation increases the risk of the senior tranche", I explain using this idea: When there is a higher possibility of defaulting together for junior and senior tranche. Thus,...
@David Harper CFA FRM Came across this post while studying. May I ask how would you explain this dynamic: Higher default correlation decreases the risk of the junior tranche. For my understanding, "higher default correlation increases the risk of the senior tranche", I explain using this...
@David Harper CFA FRM Came across this post while studying. May I ask how would you explain this dynamic: Higher default correlation decreases the risk of the junior tranche. For my...
gautamFRM
,
May 16, 2012
Replies:
8
Views:
7,600
Unusualskill
May 1, 2018
CDS vs TRS vs CLN
Thank you @emilioalzamora1!
Thank you @emilioalzamora1!
Thank you @emilioalzamora1!
Thank you @emilioalzamora1!
Jiew Kwang
,
Oct 9, 2011
Replies:
19
Views:
14,802
Tania Pereira
May 1, 2018
Interest rate dynamics of firm in financial distress (Vasicek model)
I completely agree with @emilioalzamora1 on this! That formatting looks like Kaplan, and indeed they have faithfully represented the assertions in Stulz Chapter 18.1 (is the source here). But this Stulz chapter is over 16 years old. Over the years, many of its assertions have proven problematic, at least in our forum discussions. Stulz 18.1 mixes theoretical model findings with empirical...
I completely agree with @emilioalzamora1 on this! That formatting looks like Kaplan, and indeed they have faithfully represented the assertions in Stulz Chapter 18.1 (is the source here). But this Stulz chapter is over 16 years old. Over the years, many of its assertions have proven problematic, at least in our forum discussions. Stulz 18.1 mixes theoretical model findings with empirical...
I completely agree with @emilioalzamora1 on this! That formatting looks like Kaplan, and indeed they have faithfully represented the assertions in Stulz Chapter 18.1 (is the source here). But this Stulz chapter is over 16 years old. Over the years, many of its assertions have proven problematic,...
I completely agree with @emilioalzamora1 on this! That formatting looks like Kaplan, and indeed they have faithfully represented the assertions in Stulz Chapter 18.1 (is the source here). But this...
Unusualskill
,
Apr 24, 2018
Replies:
3
Views:
116
David Harper CFA FRM
Apr 26, 2018
NGR calculation for Netting Set which includes one single trade
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BankEmoon123
,
Apr 12, 2018
Replies:
0
Views:
86
BankEmoon123
Apr 12, 2018
How to hedge Total return swap using CDS
Hi @andred0250_ I'm not following you, sorry, and I don't see the discrepancy between my comment above and question 209.2; the source to this question 209.2 is located here at and includes my subsequent clarifying comment: ... my comment above is a full decomposition, but as far as I can tell, 209.c and this thread are consistently asserting: TSR Payer (aka, protection buyer) = long CDS +...
Hi @andred0250_ I'm not following you, sorry, and I don't see the discrepancy between my comment above and question 209.2; the source to this question 209.2 is located here at and includes my subsequent clarifying comment: ... my comment above is a full decomposition, but as far as I can tell, 209.c and this thread are consistently asserting: TSR Payer (aka, protection buyer) = long CDS +...
Hi @andred0250_ I'm not following you, sorry, and I don't see the discrepancy between my comment above and question 209.2; the source to this question 209.2 is located here at and includes my subsequent clarifying comment: ... my comment above is a full decomposition, but as far as I can...
Hi @andred0250_ I'm not following you, sorry, and I don't see the discrepancy between my comment above and question 209.2; the source to this question 209.2 is located here at and includes my...
MongKoo
,
Jun 24, 2012
Replies:
5
Views:
10,980
David Harper CFA FRM
Apr 8, 2018
Effect of time to maturity on sub bonds
Hi @silver7 I moved your query to this thread, see above, let me know if this helps? Thanks!
Hi @silver7 I moved your query to this thread, see above, let me know if this helps? Thanks!
Hi @silver7 I moved your query to this thread, see above, let me know if this helps? Thanks!
Hi @silver7 I moved your query to this thread, see above, let me know if this helps? Thanks!
irwinchung
,
Apr 13, 2017
Replies:
3
Views:
150
David Harper CFA FRM
Mar 12, 2018
Delivery squeeze
Hi [USER=48426]@ , Thanks for bringing this thread up again, yes, it was one of the best discussions that we had in these forums and brings back fond memories
, in fact I had been wanting to answer your question a bit earlier, but paucity of time stopped me from doing so A shortage of deliverable bonds would increase the price of the Bond and reduce the Bond spread, theoretically this factor...
Hi [USER=48426]@ , Thanks for bringing this thread up again, yes, it was one of the best discussions that we had in these forums and brings back fond memories
, in fact I had been wanting to answer your question a bit earlier, but paucity of time stopped me from doing so A shortage of deliverable bonds would increase the price of the Bond and reduce the Bond spread, theoretically this factor...
Hi [USER=48426]@ , Thanks for bringing this thread up again, yes, it was one of the best discussions that we had in these forums and brings back fond memories
, in fact I had been wanting to answer your question a bit earlier, but paucity of time stopped me from doing so A shortage of...
Hi [USER=48426]@ , Thanks for bringing this thread up again, yes, it was one of the best discussions that we had in these forums and brings back fond memories
, in fact I had been wanting to answer...
Arka Bose
,
Jul 10, 2016
Replies:
18
Views:
1,049
QuantMan2318
Mar 12, 2018
How can collateral create exposure??
Thanks David.
Thanks David.
Thanks David.
Thanks David.
jaivipin
,
Mar 4, 2018
Replies:
4
Views:
125
jaivipin
Mar 5, 2018
Credit risk scoring model types - Pooled Models
Hi, I am little bit confused with Crouhy's definition of "Pooled models", i.e. These models are built by outside vendors, such as Fair Isaac, using data collected from a wide range of lenders with similar credit portfolios. For example, a revolving credit pooled model might be developed from credit card data collected from several banks. Just to confirm the concept: do banks really share...
Hi, I am little bit confused with Crouhy's definition of "Pooled models", i.e. These models are built by outside vendors, such as Fair Isaac, using data collected from a wide range of lenders with similar credit portfolios. For example, a revolving credit pooled model might be developed from credit card data collected from several banks. Just to confirm the concept: do banks really share...
Hi, I am little bit confused with Crouhy's definition of "Pooled models", i.e. These models are built by outside vendors, such as Fair Isaac, using data collected from a wide range of lenders with similar credit portfolios. For example, a revolving credit pooled model might be developed from...
Hi, I am little bit confused with Crouhy's definition of "Pooled models", i.e. These models are built by outside vendors, such as Fair Isaac, using data collected from a wide range of lenders...
Bernardo
,
Feb 28, 2018
Replies:
0
Views:
98
Bernardo
Feb 28, 2018
Correlation in CDS
Hi David, I have been a member since the past 4 months and have found this forum very informative. I was searching the internet regarding correlation in nth to default CDS and found this thread. Just wanted to extend the logic for pricing nth to default and ask a question on it. Suppose I have a 3rd to default CDS and even the basket has 3 reference obligations(credits). Also suppose the 3...
Hi David, I have been a member since the past 4 months and have found this forum very informative. I was searching the internet regarding correlation in nth to default CDS and found this thread. Just wanted to extend the logic for pricing nth to default and ask a question on it. Suppose I have a 3rd to default CDS and even the basket has 3 reference obligations(credits). Also suppose the 3...
Hi David, I have been a member since the past 4 months and have found this forum very informative. I was searching the internet regarding correlation in nth to default CDS and found this thread. Just wanted to extend the logic for pricing nth to default and ask a question on it. Suppose I have...
Hi David, I have been a member since the past 4 months and have found this forum very informative. I was searching the internet regarding correlation in nth to default CDS and found this thread....
Sunil Natarajan
,
Aug 28, 2008
Replies:
11
Views:
5,685
abhineet.goel@gmail.com
Dec 29, 2017
Gaussian copula modelling
Thank you so much.
Thank you so much.
Thank you so much.
Thank you so much.
daweinzettl
,
Jan 12, 2015
Replies:
6
Views:
2,026
GayatriBT
Nov 29, 2017
Benefits of Securitisation
Thank you @David Harper CFA FRM ..This is crystal clear now! Thanks, Vinay
Thank you @David Harper CFA FRM ..This is crystal clear now! Thanks, Vinay
Thank you @David Harper CFA FRM ..This is crystal clear now! Thanks, Vinay
Thank you @David Harper CFA FRM ..This is crystal clear now! Thanks, Vinay
VinayB
,
Nov 15, 2017
Replies:
2
Views:
184
VinayB
Nov 16, 2017
z-score calibration (adjustment)
Hi @uness_o7 Apologies but I haven't examined carefully his Cost of Classification; it's not technically in the LO syllabus, right? We didn't include in our notes .... That looks interesting, I will take a closer look what I get a chance ... thanks,
Hi @uness_o7 Apologies but I haven't examined carefully his Cost of Classification; it's not technically in the LO syllabus, right? We didn't include in our notes .... That looks interesting, I will take a closer look what I get a chance ... thanks,
Hi @uness_o7 Apologies but I haven't examined carefully his Cost of Classification; it's not technically in the LO syllabus, right? We didn't include in our notes .... That looks interesting, I will take a closer look what I get a chance ... thanks,
Hi @uness_o7 Apologies but I haven't examined carefully his Cost of Classification; it's not technically in the LO syllabus, right? We didn't include in our notes .... That looks interesting, I...
uness_o7
,
Nov 14, 2017
Replies:
1
Views:
93
David Harper CFA FRM
Nov 14, 2017
Impact of Default Correlations on EL
Thank you @David Harper CFA FRM , appreciate the confirmation!
Thank you @David Harper CFA FRM , appreciate the confirmation!
Thank you @David Harper CFA FRM , appreciate the confirmation!
Thank you @David Harper CFA FRM , appreciate the confirmation!
VinayB
,
Jul 1, 2017
Replies:
7
Views:
319
VinayB
Nov 8, 2017
CVA, independent amount & margin period of risk
Hi there, I am puzzled with the graph below; isn't the independent amount posted as collateral, either way, whatever happens? Does the margin period of risk then still have an impact?
Hi there, I am puzzled with the graph below; isn't the independent amount posted as collateral, either way, whatever happens? Does the margin period of risk then still have an impact?
Hi there, I am puzzled with the graph below; isn't the independent amount posted as collateral, either way, whatever happens? Does the margin period of risk then still have an impact?
Hi there, I am puzzled with the graph below; isn't the independent amount posted as collateral, either way, whatever happens? Does the margin period of risk then still have an impact?
Gdb
,
Nov 4, 2017
Replies:
0
Views:
212
Gdb
Nov 4, 2017
FRM Handbook Example 23.9: FRM Exam 2008 Q 3-31
Hello @dbansal, We have not updated the focus review videos recently (they are on our update list for 2018), but this post is already tagged for revision so we will make sure that the new video is correct. Videos take a great deal of time, especially when there is so much material to cover with study notes, writing in-depth PQs, creating new instructional videos, preparing detailed XLS and...
Hello @dbansal, We have not updated the focus review videos recently (they are on our update list for 2018), but this post is already tagged for revision so we will make sure that the new video is correct. Videos take a great deal of time, especially when there is so much material to cover with study notes, writing in-depth PQs, creating new instructional videos, preparing detailed XLS and...
Hello @dbansal, We have not updated the focus review videos recently (they are on our update list for 2018), but this post is already tagged for revision so we will make sure that the new video is correct. Videos take a great deal of time, especially when there is so much material to cover with...
Hello @dbansal, We have not updated the focus review videos recently (they are on our update list for 2018), but this post is already tagged for revision so we will make sure that the new video...
RM1
,
Sep 28, 2011
Replies:
8
Views:
2,533
Nicole Seaman
Oct 23, 2017
Margin stepup
Hi @saurabhpal49 I assume that Choudhry is referring to a coupon with an increasing step function. If the bond/tranche is based on an index, then the margin would be added to determine the floating coupon rate; e.g., maybe the floating rate for a senior tranche = LIBOR + 50 basis point margin = coupon rate, where 50 basis points is the margin. Note the text that I located below (from...
Hi @saurabhpal49 I assume that Choudhry is referring to a coupon with an increasing step function. If the bond/tranche is based on an index, then the margin would be added to determine the floating coupon rate; e.g., maybe the floating rate for a senior tranche = LIBOR + 50 basis point margin = coupon rate, where 50 basis points is the margin. Note the text that I located below (from...
Hi @saurabhpal49 I assume that Choudhry is referring to a coupon with an increasing step function. If the bond/tranche is based on an index, then the margin would be added to determine the floating coupon rate; e.g., maybe the floating rate for a senior tranche = LIBOR + 50 basis point margin =...
Hi @saurabhpal49 I assume that Choudhry is referring to a coupon with an increasing step function. If the bond/tranche is based on an index, then the margin would be added to determine the...
FrmL2_Aspirant
,
May 16, 2017
Replies:
3
Views:
958
David Harper CFA FRM
Oct 19, 2017
P2.T6.309. Default correlation, Malz sections 8.1 and 8.2
Yes David....that surely helped.....thanks so much...hopefully the question in exam shall provide the number of defaults
Yes David....that surely helped.....thanks so much...hopefully the question in exam shall provide the number of defaults
Yes David....that surely helped.....thanks so much...hopefully the question in exam shall provide the number of defaults
Yes David....that surely helped.....thanks so much...hopefully the question in exam shall provide the number of defaults
Taunk
,
Oct 30, 2016
Replies:
5
Views:
447
baheti.meenal@rediffmail.com
Oct 14, 2017
First to default put ( crouhy)
Hi @saurabhpal49 I'd explain with a simple illustration. Imagine the basket contains only two credits, each with (unconditional) default probability of, respectively say, 10.0% and 7.0%. Also, let's simplify and approximate spread by S = PD*LGD but assume LGD = 100%, so that spread approximated default probability. Now compare: If these credits are uncorrelated, what is the approximate...
Hi @saurabhpal49 I'd explain with a simple illustration. Imagine the basket contains only two credits, each with (unconditional) default probability of, respectively say, 10.0% and 7.0%. Also, let's simplify and approximate spread by S = PD*LGD but assume LGD = 100%, so that spread approximated default probability. Now compare: If these credits are uncorrelated, what is the approximate...
Hi @saurabhpal49 I'd explain with a simple illustration. Imagine the basket contains only two credits, each with (unconditional) default probability of, respectively say, 10.0% and 7.0%. Also, let's simplify and approximate spread by S = PD*LGD but assume LGD = 100%, so that spread approximated...
Hi @saurabhpal49 I'd explain with a simple illustration. Imagine the basket contains only two credits, each with (unconditional) default probability of, respectively say, 10.0% and 7.0%. Also,...
saurabhpal49
,
Sep 24, 2017
Replies:
1
Views:
257
David Harper CFA FRM
Sep 24, 2017
Settled vs actual recovery rates
It's very clear as usual, thanks a lot David.
It's very clear as usual, thanks a lot David.
It's very clear as usual, thanks a lot David.
It's very clear as usual, thanks a lot David.
saurabhpal49
,
Sep 13, 2017
Replies:
4
Views:
363
Eltanariel
Sep 14, 2017
Netting vs closeout netting
@saurabhpal49 But I do not think payment netting is triggered by counterparty default. The difference is between payment netting and close-out netting. The classic example of payment netting is an interest rate swap where, at each (eg) six-month settlement (aka, exchange), the fixed "coupon" payment is exchanged for the floating "coupon" payment, but they are netted (as in payment netting). If...
@saurabhpal49 But I do not think payment netting is triggered by counterparty default. The difference is between payment netting and close-out netting. The classic example of payment netting is an interest rate swap where, at each (eg) six-month settlement (aka, exchange), the fixed "coupon" payment is exchanged for the floating "coupon" payment, but they are netted (as in payment netting). If...
@saurabhpal49 But I do not think payment netting is triggered by counterparty default. The difference is between payment netting and close-out netting. The classic example of payment netting is an interest rate swap where, at each (eg) six-month settlement (aka, exchange), the fixed "coupon"...
@saurabhpal49 But I do not think payment netting is triggered by counterparty default. The difference is between payment netting and close-out netting. The classic example of payment netting is an...
saurabhpal49
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Sep 11, 2017
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David Harper CFA FRM
Sep 11, 2017
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