For a corporate bond, which of the following statements is true:
I. The credit spread is equal to the default rate times the recovery rate II. The spread widens when the ratings of the corporate experience an upgrade III. Both recovery rates and probabilities of default are related to the business cycle and move in oppositedirections to each other IV. Corporate bond spreads are affected by both the risk of default and the liquidity of the particular issue
For a back office function processing 15,000 transactions a day with an error rate of 10 basis points, what is the annual expected loss frequency (assume 250 days in a year)
Credit exposure for derivatives is measured using
If the marginal probabilities of default for a corporate bond for years 1, 2 and 3 are 2%, 3% and 4% respectively, what is the cumulative probability of default at the end of year 3?
For creditrisk calculations, correlation between the asset values of two issuers is often proxied with:
