The Options Theoretic approach to calculating economic capital considers the value of capital as being
equivalent to a call option with a strike price equal to:
There are two bonds in a portfolio, each with a marketvalue of $50m. The probability of default of the two
bonds over a one year horizon are 0.03 and 0.08 respectively. If the default correlation is zero, what is the one
year expected loss on this portfolio?
A bullet bond and an amortizing loan are issued at the same time with the same maturity and with the same
principal. Which of these would have a greater credit exposure halfway through their life?
Which of the following is not a limitation of the univariate Gaussian model to capture the codependence
structure between risk factros used for VaR calculations?