Question $13$

Define PD as the $($expected$)$ probability of default and LGD as the loss given default. Take

EAD, exposure at default, as fixed and ignore it$.$ At a portfolio level, unexpected credit losses

are driven by:

PD$,$ LGD$,$ correlations across defaults and LGD

the distribution of LGD

PD$,$ LGD$,$ correlations across defaults

PD onlyQuestion $12$

For which of the following purposes is a high confidence level $($VAR$)$ advisable?

as a benchmark measure of downside risk for trading desks

none of the above

for capital adequacy purposes

for backtesting purposesQuestion $16$

A three$-$class sequential pay CMO has an initial principal balance of $$30$ million per class. In

the first month, interest payments of $$5$ million and principal payments of $$2$ million are

received. In the second month, Class A holders receive interest on

principal and Class

$B$ holders receive interest on

principal.

$$30$ million; $$30$ million

$$28$ million; $$30$ million

$$30$ million; $$28$ million

$$27$ million; $$27$ million

$$28$ million; $$28$ million