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Hi Dailay I believe you are thinking on the right lines, as economy conditions go bad people income and asset prices will go down. LGD like you said can be derived from house price index, similarly reason for default will be fall in Income due to which Loan service ratio of borrower will go...

Hi My doubt is on Credit Risk+. I was going through the CFSB doc at following link, In the first model where we come across a recursion to create distribution. (equation 25 page 40) At that point we need data input for E[j] and V[j] where j is 1<j<m where m is the number of exposure bands you...

Unexpected loss is nothing but portfolio var when average loss is not counted. Calculating Std. Dev of Portfolio Expected Return Average (Return) (Exp-Avg)^2 Probability (Prob*(Exp-Prob)^2) -0.012 -0.01 0.000004...

Hello David. I passed Full Exam. Thanks for your video and support to answers. Thanks a lot sidharth

Sauder how/why.. these are doubtw which came to me .while studying this chapter.....so i thought it might help to clarify question.. regarding aggregating returns....can u explain on historical simulation approach ??

Saunders chapter 2 : Q1) What is conditional and unconditional volatility distribution ?? can you gimme example... Q2) what way the portfolio returns are aggregated ?? Thanks in advance sidharth

Hi David I have a doubt here.. if Stock price increase by $1 then forward increase in value ,($1),will not be given to us ...but will stay in contract...and should not that money would grow by risk free rate ...as we always assume..... then also payment at the end of time will be...

thanks i got the concept :)

David thanks for reply. i think formula should be Portfolio value/(Short Delta*Future).. If portfolio value is 500...future is also 500...and short delta is .5 then manager will need to short 2 contracts to maintain hedge... if portfolio goes down by 100 points....loss is 100 points...

7. You want to implement a portfolio insurance strategy using index futures designed to protect the value of a portfolio of stocks not paying any dividends. Assuming the value of your stock portfolio decreases, which strategy would you implement to protect your portfolio? Answer is to sell...

so when calculating difference we take absolute value and compare it with Rf. so in this example |2%-7%| = 5%. if Rf is 4% then arbitrage exist. Is it right ?

Gorton Reading Imagine an investor who compares the market spread on the BBB subprime tranche (expressed as an annual percentage), Scash to the spread on the ABX index referencing that same bond, SCDS (also expressed as an annual percentage). The basis is SCDS – Scash. So, SCDS < Scash is a...