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Hi, I must admit I'm a bit struggling with the copula study.. Could anyone shed some light for me / correct my understanding. - The copula is useful as it allows to build a single multivariate distribution from several single variable distributions. - To do this, we map the values of the...

There are both in practice exam. But Matthew made a point. The conditional probability asks you to find the probability of default in the future given default has not occured yet. When the question refers to default inyear 2,3,4,.. it usually asks you to find the probability of default...

Thanks a lot @David Harper CFA FRM , I had no clue how to calculate this before reading your excel...;)

Hi @nicolas2529 , The variance of PD is simply the variance of a Bernouilli variable: Variance (PD) = PD x (1-PD) Kind regards,

Good evening all, Thanks to the very useful ressources area on the BT website, I realized that a lot of questions are actually very similar from one practice exam to the next. The question I have is: Are these practice exams really representative of the actual exams? I just did the latest...

@Nicole Seaman , Thank you Nicole. Furthermore, I found my answer in a nice video made by David: This is because we are looking at a difference and not an addition as we usually do with VaR of 2 assets... Excellent to realize that before the exam :cool:

Hi all, This is probably a really dumb question but why in this formula: Variance of the surplus = 1002 * 10%2 + 902 * 5%2 - 2 * 100 * 90 * 10% * 5% * 0.8 = 48.25 do use the "-" sign? In all the VaR formula for 2 assets we have VaR² A + VaR² B "+" CorrAB x VaR A x VaR B Could someone explain...

Good morning, thanks for your question because it made me practice and realize my matrix calculation at first was really rusty... How I would do that: Undiversified VaR is = VaR Bond A + VaR Bond B = 1.645 x 5% x 25 x sqrt(10/250) + 1.645 x 12% x sqrt(10/250) x 75= 0.41125 + 2.961 = 3.372250 To...

@David Harper CFA FRM , Once again, many thanks for your explanation. Regarding the par value, I would like to challenge you a bit... Merton assumes a ZC bond in its model which is why bond's par value should be used as this is the terminal value of the debt and on debt's maturity, this is the...

Good morning Emilio, I am not David but while we wait for him to reply, I will try to shed some light (it's only my 2 pence) The protection seller (who sold a CDS) is exposed to the risk that: i) the the reference entity default. This is covered by the put on the debt. If the default occurs...

Good morning all, I am currently reviewing my notes on "Credit Counterparty risk" by Allan Malz and more specifically the AIM: "Describe the Merton model, and use it to calculate the value of a firm, the values of Debt / Equity. Thanks to David, I could already calrify one misunderstanding I...

@David Harper CFA FRM , Thank you for confirming / clarifying! Regarding the LGD confusion, I think an easy way not to get it wrong is to understand the LGD as the loss an investor would suffer an a specific instrument without taking into account CDS protection. (then this LGD is simply plugged...

@David Harper CFA FRM , Thank you very much for your time answering my question. You made a point by stressing the importance of assumptions to assess which models could/should be used. I still have a point needed to be clarified. The reason why you assume 100% of premium payment seems related...

Hi all, This is my first post on this forum (which I regularly consult for all the valuable information's in it). On question 5, I fail to understand why couldn't we simply use the formula: PD = Hazard Rate = Spread / (1-R). Using this would give a Spread of exactly 560 bps. Could someone tell...

same got it for my question but I am not sure this is correct... T-stat 1.91 hence a 10% probability... but I was confused with the t-stat for the mean test.. Got to look into that ^^

405.2, I do not see any correct answer in the propositions... Damn I must be really bad ^^