Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Assume that your bank underwrote 5 loans to various hedge funds based in Cayman Islands each valued at $1M. The PDs (5% each) of each hedge fund are independent of each other and follow a binomial distribution. Assume that recovery rate is 30% for each loan. What is the 99.9% Credit Value at Risk (CVAR )? Please explain each step in your calculation.
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