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Is there anyone who remembers CVA calculation?

I know how to slove this question

However I don't remember what I chose.

a, b, c, d..I think I chose a or b.

I know how to slove this question

However I don't remember what I chose.

a, b, c, d..I think I chose a or b.

Cash Flow in Year 1: 1,000,000 with a probability of default of 35%, a recovery rate of 70% and a discount factor of .90

Cash Flow in Year 2: 750,000 with a probability of default of 40%, a recovery rate of 80% and a discount factor of .85

I solved this as follows:

1,000,000 * 0.35 * (1 - 0.70) * 0.90 = 94,500

750,000 * 0.40 * (1 - 0.80) * 0.85 = 51,000

CVA = 94,500 + 51,000 = 144,500

Is this the correct approach?

From what I recall, the problem was something as follows:

Cash Flow in Year 1: 1,000,000 with a probability of default of 35%, a recovery rate of 70% and a discount factor of .90

Cash Flow in Year 2: 750,000 with a probability of default of 40%, a recovery rate of 80% and a discount factor of .85

I solved this as follows:

1,000,000 * 0.35 * (1 - 0.70) * 0.90 = 94,500

750,000 * 0.40 * (1 - 0.80) * 0.85 = 51,000

CVA = 94,500 + 51,000 = 144,500

Is this the correct approach?

Cash Flow in Year 1: 1,000,000 with a probability of default of 35%, a recovery rate of 70% and a discount factor of .90

Cash Flow in Year 2: 750,000 with a probability of default of 40%, a recovery rate of 80% and a discount factor of .85

I solved this as follows:

1,000,000 * 0.35 * (1 - 0.70) * 0.90 = 94,500

750,000 * 0.40 * (1 - 0.80) * 0.85 = 51,000

CVA = 94,500 + 51,000 = 144,500

Is this the correct approach?

Yes.

However, Probability of default is constant.

I don't remember what I chose

I think correct answer is

Yes.

However, Probability of default is constant.

I don't remember what I chose

I think correct answer is**a or b**

However, Probability of default is constant.

I don't remember what I chose

I think correct answer is

What do you mean that "Probability of default is constant."? Don't we have to use **different** probability of default values (e.g. 35% and 40%) in the calculations above? Or, were you referring to the probability of default values that were given on the exam?

but 2Year Probability of default is

I tried to remember question but my memory was blurred.

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YES YES INDEED! It's game over, man! I did it and this without reading half of the operational risk readings and without reading 'current issues' at all.

Anyway, David you are the 'man tonight' - this is for sure! I am comparing the win of the US open by Stan Wawrinka over Djokovic last year when he was interviewed by Tom Rinaldi from ESPN.

Anyway, David you are the 'man tonight' - this is for sure! I am comparing the win of the US open by Stan Wawrinka over Djokovic last year when he was interviewed by Tom Rinaldi from ESPN.

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