1. The company recorded losses of 1,000,000, 3,000,000 and 5,000,000 over its period of operation. With a confidence level of 99% and a standard deviation of 8,000,000, what could be its estimated shortfall?
2. Assume that for 3 consecutive periods, the losses incurred were P25M, P15M and P20M. The volatility of the transaction is valued at P5M. What is the 20day Var considering a 90% confidence level?
3. Suppose the stock price is 40 and we need to price a call option with a strike of 45 maturing in 4 months. The stock is not expected to pay dividends. The continuously-compounded risk free rate is 3%/year, the mean return on the stock is 7%/year, and the standard deviation of the stock return is 40%/year. How much is the call option price?
4. Assume that a bank has a total of $20million of small exposures of a certain type with one year probability of default at 5% and the recovery rate averages 30%. Estimate the 99% one-year credit VaR using Vasicek's model if the copula correlation parameter is 0.3. What is the Worst Case Default Rate?
5. Given that the hazard rate is at 20%, what would be the probability of default of a loan after 3 years?

 

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Answer rating: 100% (QA)

1 To estimate the shortfall with a confidence level of 99 and a standard deviation of 8000000 we can use the Zscore formula The formula is Shortfall Z ... View the full answer