aianjie

 

The correct answer is B

The standard default model assumes a two-state (binary) default process. Therefore, the variance = EDF × (1 ? EDF) = (0.12) × (1 ? 0.12) = 0.1056. Thus, standard deviation of default frequency (0.1056)0.5 = 0.3496.

aianjie

 

5、Which of the following statements about unexpected loss is TRUE?

A) Unexpected loss is a non-linear function of adjusted exposure.

B) Adjusted exposure is a non-linear function of unexpected loss.

C) Unexpected loss is a linear function of adjusted exposure.

D) Adjusted exposure is a linear function of unexpected loss.

aianjie

 

3、Unexpected loss will increase under which of the following circumstances?

A) Variance of default frequencies increases.

B) Expected default frequency decreases.

C) Usage given default decreases.

D) Adjusted exposure increases but default frequency decreases.

aianjie

 

The correct answer is A

 

 

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[2008]Topic 45: Unexpected Loss 相关习题

2009-6-30 09:51

aianjie

 

The correct answer is A

Default and credit migration (downgrade) will decrease loan return. Similarly, loan returns increase as recovery rates increase.

aianjie

 

AIM 2: Define, calculate and interpret the unexpected loss on an asset.

1、Decreasing the recovery rate will do which of the following to unexpected loss?

A) Recovery rate does not influence UL.

B) Increase UL.

C) Decrease UL.

D) No change.

aianjie

 

The correct answer is B

Reducing the recovery rate increases the variability around the expected loss level, increasing standard deviation (unexpected loss).

aianjie

 

2、If the adjusted exposure for Bank X is $15 million, the probability of default is 2%, the recovery rate is 20%, and the standard deviation of EDF and LGD is 5% and 3%, respectively. What is the unexpected loss for Bank X?

A) $603,366.

B) $302,242.

C) $240,000.

D) $24,270.

aianjie

 

The correct answer is B

Based on the relative magnitudes of expected loss and its standard deviation, i.e. unexpected loss, expected loss may be greater, less or equal to unexpected loss. Without further information, 'indeterminate' is the best answer choice.

aianjie

 

3、Under the option view of the firm, which of the following is TRUE?

A) The firm will default on its obligations if the value of the firm exceeds the value of the debt.

B) The firm will default on its obligations if the value of its equity exceeds the value of the debt.

C) The firm will default on its obligations if the value of its equity is less than the value of the debt.

D) The firm will default on its obligations if the value of the firm is less than the value of the debt.