aianjie

 

4、The first step of CreditMetrics would include all of the following EXCEPT:

A) calibrating the Poisson distribution.

B) calculating the probability of default.

C) gathering yield curve data.

D) None of the above (i.e., they are all part of the first step of CreditMetrics).

aianjie

 

The correct answer is A

The Poisson distribution is not part of CreditMetrics. The first step consists of the gathering of inputs. The gathering includes calculating many measures such as probability of default, recovery rate statistics, factor correlations and their relationships to the obligors, yield curve data, and individual exposures that are distinct from the other inputs.

 

aianjie

 

The correct answer is D

The banks can use CRPMs to analyze the adequacy of their reserves. The CRPM can determine the capital requirements of individual loans, which allows the use of portfolio theory in the formation of new loans. CRPMs can help price derivatives on risky assets or pools of risky assets (e.g., collateralized credit obligations). The pricing information can also be used by ratings agencies.

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AIM 2: Discuss how the three risk drivers are modeled in the CreditMetrics model and list the four steps included in CreditMetrics.

1、Which of the following is not a step used in the CreditMetrics credit risk portfolio modeling process?

A) Generating correlated migration events.

B) Calibrating the multivariate non-normal distribution. 

C) Measuring “marked-to-model” losses.

D) Calculating the portfolio loss distribution.

aianjie

 

The correct answer is B

CreditMetrics is based on a multivariate normal distribution. The four main steps used by CreditMetrics is to: gather input data, generate correlated migration events, measure “marked-to-model” losses and calculate the portfolio loss distribution.

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2、With respect to computing the probability of default, CreditMetrics:

A) is a ratings-based model.

B) uses the Poisson distribution.

C) is useless.

D) None of the above.