Hi David,
Question number of 7 of FRM exam 2012:
You are evaluating the credit risk in a portfolio that has loan a and b. you are interested in the risk contribution of each of the loan to the unexpected loss of the portfolio. Given the information in the table below, and assuming that the correlation of default between loan A and loan b is 20%. what is the contribute of loan an to the risk of the portfolio?
Loan A: exposure= $3M. PD=1.5%. volatility of PD=7%. LGD=30% and Volatility of LGD=20%
Loan b: exposure= $2M. PD=3.5%. volatility of PD=12%. LGD=450% and Volatility of LGD=30%
My first question please: Is this applicable to this year's exam?
Can you elaborate on the answer if we do have to know it please.
Best,
S
Question number of 7 of FRM exam 2012:
You are evaluating the credit risk in a portfolio that has loan a and b. you are interested in the risk contribution of each of the loan to the unexpected loss of the portfolio. Given the information in the table below, and assuming that the correlation of default between loan A and loan b is 20%. what is the contribute of loan an to the risk of the portfolio?
Loan A: exposure= $3M. PD=1.5%. volatility of PD=7%. LGD=30% and Volatility of LGD=20%
Loan b: exposure= $2M. PD=3.5%. volatility of PD=12%. LGD=450% and Volatility of LGD=30%
My first question please: Is this applicable to this year's exam?
Can you elaborate on the answer if we do have to know it please.
Best,
S