Consider a portfolio of m= 1000 equally rated credit risks. Assume that for every obligor the...
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Consider a portfolio of m= 1000 equally rated credit risks. Assume that for every obligor the exposure is e, = 1 million pounds, for i = 1,..., 1000 and the default probability is p = 1% for i=1,..., 1000. Calculate the expected value and the standard deviation of the portfolio loss in each of the following situations. (a) The loss given defaults are deterministic 8, = 0.4 for every i = 1,...1000, and defaults happen independently. (b) The loss given defaults are deterministic 6, = 0.4 for every i = 1,...1000, let Y, be the default indicator of obligor i and assume that p(Y..Y) = 0.005 for every i ‡ j. (c) How would you comment on the financial meaning of these results? Consider a portfolio of m= 1000 equally rated credit risks. Assume that for every obligor the exposure is e, = 1 million pounds, for i = 1,..., 1000 and the default probability is p = 1% for i=1,..., 1000. Calculate the expected value and the standard deviation of the portfolio loss in each of the following situations. (a) The loss given defaults are deterministic 8, = 0.4 for every i = 1,...1000, and defaults happen independently. (b) The loss given defaults are deterministic 6, = 0.4 for every i = 1,...1000, let Y, be the default indicator of obligor i and assume that p(Y..Y) = 0.005 for every i ‡ j. (c) How would you comment on the financial meaning of these results?
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a In this scenario the loss given defaults are deterministic at 04 for every obligor Since defaults happen independently and the default probability i... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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