Become GARP Certified with updated FRM-Part-2 exam questions and correct answers
The head of the fixed-income department of a bank asks a risk analyst to review anoutstanding bond issued by Company GRN, a livestock producer. The bondcurrently trades at a spread of 250 bps over the risk-free interest rate and has arecovery rate of 75%. Senior management of the bank has expressed concernabout the slowdown in business activities in the livestock industry, which isexpected to last for the next 3 years. The analyst applies the constant hazard rateprocess in estimating default probability and assumes that, under a stressed marketscenario, the bond would trade at a spread of 480 bps over the risk-free interest ratecurve, and its recovery rate would decrease to 40%. Assuming the stress scenarioprevails, what would be the correct estimate of the probability that Company GRNwould not default on its bond over the next 3 years?
Which of the following statements regarding risk management programs with service providers to manage outsourcing risk is correct?
Which of the following statements best describes a Gaussian copula?
The Merton model is different from Moody’s-KMV Expected Default Frequency approach in two key areas. Which of the following statements refers to one of those differences?
A risk analyst is reviewing his bank’s credit risk management policies. He notes that banks have limits on related-party financing decisions. His colleague agrees and correctly adds that:
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