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94. To hedge against future, unanticipated, and significant increases in borrowing rates, which of the following alternatives offers the greatest flexibility for the borrower?
a. Interest rate collar
b. Fixed for floating swap
c. Call swaption
d. Interest rate floor
95. Assume the true distribution of returns is leptokurtotic. If we assume normality when we calculate the VaR, then which of the following statements is true:
a. The 95% VaR is overstated.
b. The 95% VaR is understated.
c. The 95% VaR is appropriate.
d. We cannot state the relationship between the true VaR and the calculated VaR.
The next three questions use the following data:
98. A portfolio consists of two bonds. The credit-VaR is defined as the maximum loss due to defaults at a confidence level of 98% over a one-year horizon. The probability of joint default of the two bonds is 1.27%, and the default correlation is 30%.
Bond Value one year forward One year cumulative default probability Recovery rate
B1=USD 1,000,000 3% 60%
B2=USD 600,000 5% 40%
What is the expected credit loss of the portfolio?
a. USD 0
b. USD 9,652
c. USD 20,348
d. USD 30,000
96. What is your best estimate of the credit-VaR for this portfolio of bonds based on the distribution of losses due to defaults?
a. USD 570,000
b. USD 400,000
c. USD 360,000
d. USD 370,000
97. In the previous question, you estimated a VaR that corresponds to the VaR obtained from CreditRisk+. Suppose that instead you wanted to estimate the VaR using the CreditMetrics approach. If you were given all additional data listed below, which data would you not need to estimate the CreditMetrics-Style credit-VaR?
a. Volatility of firm value for each issuer
b. Transition matrix for downgrades and upgrades in addition to default probabilities
c. Tern structure of credit spreads and interest rates
d. Promised coupon payments and maturity | 
发表于 2009-3-31 14:39
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