credit-var

Learning Objectives: Describe the use of a single-factor model to measure portfolio credit risk, including the impact of correlation. Define beta and calculate the asset return correlation of any pair of firms using the single factor model. Using the single-factor model, estimate the probability...

Hi! On last FRM exam, there was a question like: Portfolio of 68 bond equally weighted, each 2 million worth. 6 defaults were expected and defaults were independent. What is 95% Credit VaR? The answer I have found was: 6*2 - 2*68*0.04 = 6.56mil I suppose the binomial model is used here but...

Dear David, Regarding AIM: Assess the effects of correlation on a credit portfolio and its Credit VaR in Malz Chpater 8, could you kindly explain how the number of defaults are calculated in the example provided? Many thanks, Karine

Hi David, I did the FRM part 2 exam in November 2016 but unfortunately I falsed. I remembered one questios about Credit Var, which I was not able to get the solution. Please could you help me? question: Bank has a basket of 500 short CDS. Each CDS for $1.000.000 bond, which has a 4%...

Hi, In the chapter Portfolio credit Risk (Allan M Malz) regarding the CVaR it is mentioned that when the PD is less then the significance level, then CVaR would be (-) ve or there would be a gain instead of loss as extreme loss is Zero, and if PD is more than significance level then CVaR is...

Hi David, Can you please show (expand) the ULp formula for 4 assets ? I want to know how the formula works (or how it looks like in 4 assets) instead of just memorizing the formula you provide us for 2 assets ? What if we were asked to find ULp for 5 assets...how would the formula looks...

Hi David, "A portfolio has two risky bonds. each bond is $500000. the monthly PD for each is 0.1682%. What is the best estimate of the monthly 99.9% credit VaR for this portfolio, assuming no default correlation and no recovery? a) $841 b) $1682 c) $998318 d) $498318" Answer is d...