On last FRM exam, there was a question like:
Portfolio of 68 bond equally weighted, each 2 million worth. 6 defaults were expected and defaults were independent.
What is 95% Credit VaR?
The answer I have found was:
6*2 - 2*68*0.04 = 6.56mil
I suppose the binomial model is used here but...
Regarding AIM: Assess the effects of correlation on a credit portfolio and its Credit VaR in Malz Chpater 8,
could you kindly explain how the number of defaults are calculated in the example provided?
I did the FRM part 2 exam in November 2016 but unfortunately I falsed. I remembered one questios about Credit Var, which I was not able to get the solution. Please could you help me?
Bank has a basket of 500 short CDS. Each CDS for $1.000.000 bond, which has a 4%...
In the chapter Portfolio credit Risk (Allan M Malz) regarding the CVaR it is mentioned that when the PD is less then the significance level, then CVaR would be (-) ve or there would be a gain instead of loss as extreme loss is Zero, and if PD is more than significance level then CVaR is...
Can you please show (expand) the ULp formula for 4 assets ? I want to know how the formula works (or how it looks like in 4 assets) instead of just memorizing the formula you provide us for 2 assets ? What if we were asked to find ULp for 5 assets...how would the formula looks...
"A portfolio has two risky bonds. each bond is $500000. the monthly PD for each is 0.1682%. What is the best estimate of the monthly 99.9% credit VaR for this portfolio, assuming no default correlation and no recovery?
Answer is d...