Please, use the following information for questions 21-33: Suppose there are two ratings categories: A and...
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Please, use the following information for questions 21-33: Suppose there are two ratings categories: A and B, along with default. The ratings-migration probabilities look like this for a B-rated loan: Rating in 1 year A B Probability 0.05 0.9 0.05 Default The yield on A rated loans is 5%; the yield on B rated loans is 10%. All term structures are flat (i.e. forward rates equal spot rates). A loan in default pays off 50%. Based on Question 26 and using the mean of your portfolio as the benchmark, what is the 1-year VaR for the whole portfolio with 90.75% confidence interval? O 60 215 50 50 54 O 5% 110 Please, use the following information for questions 21-33: Suppose there are two ratings categories: A and B, along with default. The ratings-migration probabilities look like this for a B-rated loan: Rating in 1 year A B Probability 0.05 0.9 0.05 Default The yield on A rated loans is 5%; the yield on B rated loans is 10%. All term structures are flat (i.e. forward rates equal spot rates). A loan in default pays off 50%. Based on Question 26 and using the mean of your portfolio as the benchmark, what is the 1-year VaR for the whole portfolio with 90.75% confidence interval? O 60 215 50 50 54 O 5% 110
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