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Thanks. I am not sure I understand your answer. Just to avoid confusion, I am not asking about derivatives, only bonds and loans. As to the bonds, when calculating PV (as you say) which interest rate do you use? Does your answer mean that I should use as an exposure marked-to-market value...

Hi, I am trying to evaluate credit risk of a bond portfolio and the first step is to calculate expected loss: EL = Exposure * PD * LGD I have a few questions: A bank purchases a bond at a discount. What is the exposure: is it the face value or the paid price? Is it different for bonds...

Ahh, That was a calculation mistake. 1 year Economic Capital (direct calculation) at 99.95 is of course $514,549. That makes sense in a way that it is somehow comparable to regulatory charge. On the other hand, Deutsche Bank calculates EC at 1 year horizon at 99.98% confidence level...

I am not sure I understand how this works. Lets assume I am a financial institution with rolling daily portfolio of 1 million USD Daily mean is 0.00012 (30% annual) and stdev is 0.02 (equivalent to 31.62%), lets assume that returns are normally distributed. 1-day-VaR 99%...

What is the common practice in terms of horizon when setting Economic Capital for market risk? Is it 10 business days as regulatory VaR? Thanks, G

Hey, In your videos covering Basel II, you have very nice and comprehensive maps that summarize different pillars and approaches. Are these maps available to members and if so, in which format? George