Learning objectives: Distinguish between expected loss and unexpected loss and provide examples of each. Interpret the relationship between risk and reward and explain how conflicts of interest can impact risk management.
Questions:
20.2.1. According to GARP, one of the building blocks in risk...
Learning objectives: Define and calculate expected loss (EL). Define and calculate unexpected loss (UL). Estimate the variance of default probability assuming a binomial distribution. Calculate UL for a portfolio and the UL contribution of each asset.
Questions:
921.1. The following simplified...
Learning objectives: Explain expected loss, unexpected loss, VaR, and concentration risk, and describe the differences among them. Evaluate the marginal contribution to portfolio unexpected loss. Define risk-adjusted pricing and determine risk-adjusted return on risk-adjusted capital (RARORAC)...
Hi David,
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...
Hi David,
There seems to be an inconsistency in the way EC is calculated.
From your explanation, and the explanation in the reading, the unexpected loss is one sigma (or a multiple of sigmas) AWAY from the expected value of the portfolio, which should be the value of the portfolio minus the...
Dear Mr David
Sir, while going through the earlier posts, I came across the following formula for calculating the portfolio Unexpected Loss as benig sent by you to 'ravi80' on 23 June 2008.
UL(p) = SQRT [sum(i) sum(j) correlation (i,j)UL(i) * UL(j)] ...........................(A)...
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