Hi David,
There are two doubts I have from the new credit risk quiz (Round 2)
1) Which most nearly described the usage given default (UGD)?
In this I am not able to differentiate between ans A and B, reason being that UGD comes as an option to take more loan... and in stock put and call both provides option to buyer so how are we comparing this with loan in this case.
2)Because recoveries are stochastic (random), loss given default (LGD) deserves to be characterized by a range or distribution rather than a point-estimate. The beta distribution is well-suited to characterize loss given default (LGD) due to its flexibility. LGD can model each of the following EXCEPT:
Please can you elaborate on ans little more as am not able to understand the explanation.
Appreciate you help and guidance on this. Thanks a ton
OM
There are two doubts I have from the new credit risk quiz (Round 2)
1) Which most nearly described the usage given default (UGD)?
In this I am not able to differentiate between ans A and B, reason being that UGD comes as an option to take more loan... and in stock put and call both provides option to buyer so how are we comparing this with loan in this case.
2)Because recoveries are stochastic (random), loss given default (LGD) deserves to be characterized by a range or distribution rather than a point-estimate. The beta distribution is well-suited to characterize loss given default (LGD) due to its flexibility. LGD can model each of the following EXCEPT:
Please can you elaborate on ans little more as am not able to understand the explanation.
Appreciate you help and guidance on this. Thanks a ton
OM