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P2.T6.322. Credit exposure metrics, continued

Nicole Seaman

Chief Admin Officer
Staff member
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AIM: Define the following metrics for credit exposure: ... expected positive exposure, effective exposure, and maximum exposure

Questions:

322.1. All three questions refer to the chart below, which plots four lines (functions) over time. Only the blue line (with circular markers) is labeled; the blue line represents expected exposure (EE).



Which of the following does the dotted orange line most likely represent?

a. Effective expected exposure (effective EE)
b. Expected positive exposure (EPE)
c. Potential future exposure (PFE)
d. Maximum potential future exposure (maximum PFE)

322.2. The flat red line, which has a value of 0.305, is the average of the series of blue values (the blue, circular markers). What does the red line represent?

a. Effective expected exposure (effective EE)
b. Expected positive exposure (EPE)
c. Potential future exposure (PFE)
d. Maximum potential future exposure (maximum PFE)

322.3. Each of the following is true about the illustrated credit exposure metrics, except which is false?

a. At any point in time, effective EE cannot be less than EE
b. (effective) EPE is average (effective) EE over time
c. Effective EPE cannot be less than EPE
d. For each point in time, there is a different maximum PFE such that maximum PFE does not represent a single value

Answers:
 
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