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Correct answer is C
A is incorrect as the expected loss which is a function of probability of default should be higher than USD 0.2mn given the lower S& credit rating (BB) of the new counterparty.
B is incorrect as the peak credit exposure, which is not a function of the credit profile of the counterparty, should be the same (i.e. USD 8mn) as the two interest rate swaps are identical.
C is correct as the peak credit exposure is the same (i.e. USD 8mn) as the two interest rate swaps are identical. Also, the expected loss should be higher than that of the earlier transacted swap as the new counterparty is of a lower credit profile.
D is incorrect as the credit exposure which is not a function of the credit profile of the counterparty, is lower from the earlier transacted interest rate swap. Also, the expected loss which is a function of probability of default should be higher than USD 0.2mn given the lower S& credit rating (BB).
Reference: John B. Caouette, Edward I. Altman, and Paul Narayanan, Managing Credit Risk (New York: Wiley, 1998) Chapter 21 | 
发表于 2009-6-13 10:44
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