# Credit Risk Part A

Discussion in 'P2.T6. Credit Risk (25%)' started by Neha_Agrawal, Jun 23, 2008.

1. ### Neha_AgrawalNew Member

FYI it has been described on slide 42 that 'p' is the Probability of Repayment and '1-p' is the Prob of Default. Coming to Slide 46 the numerical says PD =.9725 from previous which should actually be Prob of Repayment. The Calculation is correct.
Since I haven't purchased Saunders yet and was trying to seek clarification that in the formula we are feeding in the value of Prob of repayment rather than PD.

I understand that this has been dropped out of the curriculum, hence need not worry.

Thanks

Neha

2. ### David Harper CFA FRMDavid Harper CFA FRM (test)Staff Member

Hi Neha,

You are correct, I have a typo on slide 46. p = 97.25 refers, as you say, to probability of repayment.
Saunders always means "probability of repayment" by 'p' such that 1-p = PD, in his reading.
(although I wish he wouldn't use p this way, i still think it is confusing. But my error, still).
(and you are right, this technically has dropped out of 2008 AIMS, but still worth looking at)

David