What's new

# Calculation on rho in BASEL (Hull reading)

#### NNath

##### Active Member
Hi @David Harper CFA FRM ,

In the calculation below for rho seem like the formula i rho ~ 0.12(1+exp(-50*PD)) is not being used. I am getting rho = 0.1927.

#### Attachments

• 109 KB Views: 27

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
Hi @NNath
• For Corporate, sovereign and bank exposures, the rho is given by ρ = 0.12*[1+ e^(-50*PD)]
• For Retail Exposures (other than residential mortgages, ρ = 0.15, and revolving exposures, ρ = 0.04), rho is given by 0.03 + 0.13*exp(-35*PD). In this case (retail loans that are not mortgages), ρ = 0.03 + 0.13*exp(-35*0.01) = 0.121609. It looks like we didn't include this variation in the summary notes (but I imagine realize this level of detail will not be tested, but assume you are seeking additional mastery.) I hope this helps!