1. Nicole Seaman

    P1.T4.921. Risk contribution toward the portfolio's unexpected loss (Schroeck Ch.5)

    Learning objectives: Define and calculate expected loss (EL). Define and calculate unexpected loss (UL). Estimate the variance of default probability assuming a binomial distribution. Calculate UL for a portfolio and the UL contribution of each asset. Questions: 921.1. The following simplified...
  2. Nicole Seaman

    P2.T6.901. Credit exposure and valuation adjustments (Gregory, Ch.4)

    Learning objectives: Describe credit exposure, credit migration, recovery, mark-to-market, replacement cost, default probability, loss given default, and the recovery rate. Describe credit value adjustment (CVA) and compare the use of CVA and credit limits in evaluating and mitigating...
  3. Nicole Seaman

    P2.T6.709. Credit risk components

    Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than's typical question such that the intended difficulty level is nearer to an...
  4. Nicole Seaman

    P2.T6.706. Heuristic approach versus neural networks (De Laurentis)

    Learning objectives: Describe the use of a cash flow simulation model in assigning rating and default probability, and explain the limitations of the model. Describe the application of heuristic approaches, numeric approaches, and artificial neural networks in modeling default risk and define...
  5. C

    Real world application: Deriving default probabilities from observed CDS spreads

    Hi there, I have to solve a problem which is actually a real world application of Malz, Chapter 7 - Bootstrapping default probabilities given an observable CDS spread curve. Please refer to the excel attached: I have created an excel spreadsheet that should do the calculation. What it...
  6. K

    Computing default probability

    Hello David, I am finding it little difficult to comprehend the way the words are drafted in problems related to computation of default probability. 1. The 10 yr bond pays annual coupons and probability of default is 2%. What is the probability that the bond pays three coupons and default at...