[ 2009 FRM Sample Exam ] Quantitative Analysis Q22 limitation, simplified, difficult, following, structure

lalamei

 

22. Which of the following is NOT a limitation of KMV's Estimated Default Frequency (EDF) model?

A. It is difficult to price sovereign credit risk since asset values and volatility are not directly observable

B. EDFs are biased by periods of high or low defaults

C. Takes a simplified view of the capital structure of a firm

D. The model often fails to explain real world credit spreads

lalamei

 

Correct answer is Bfficeffice" />

Choices A, C and D are limitations of KMV's estimated default frequency model.

EDF are not biased by periods of high or low defaults as are models based on Moody's and Standard & Poor's risk ratings.

lumi

谢谢

wuna

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vory

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nayizhenfeng

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