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Category > Business & Finance Posted 29 Jul 2017 My Price 12.00

CREDIT VAR FOR TWO BONDS

CREDIT VAR FOR TWO BONDS

A risk analyst is trying to estimate the credit VAR for a portfolio of two risky bonds. The credit VAR is defined as the maximum unexpected loss at a confidence level of 99.9% over a one-month horizon. Assume that each bond is valued at $500,000 one month forward, and the one-year cumulative default probability is 2% for each of these bonds. What is the best estimate of the credit VAR for this portfolio, assuming no default correlation and no recovery?

  1. $841
  2. $1,682
  3. $998,318
  4. $498,318

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Status NEW Posted 29 Jul 2017 01:07 PM My Price 12.00

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