Credit Risk Exam 16 April 2016
30 Questions
| Total Attempts: 111
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Questions and Answers
- 1.
What economic drivers could explain an inverted Credit Curve? - 2.How would you replicate shorting a bond using derivatives and a cash Deposit?
- 3.
What parameter is key in the pricing of a CDO? Why?
- 4.If Correlation is High, how are losses distributed in a Bond Portfolio?
- 5.How does duration change with increasing Credit spreads? Why?
- 6.What trades would you put in to build a Flattener? When would you benefit?
- 7.
What does the graph represents? What could explain such a profile?
- 8.What's a CLN? What's a typical payoff? How do issuers replicate it?
- 9.Explain in few points how to value a CDS
- 10.How would you compare the Volatility of CDS options (Calls and Puts out of the money)?
- 11.Define PD, LGD, EAD
- 12.A 5Y Corporate bond paying a coupon of 1.5% quotes 100%.What could be the extreme Prices of this bond, in which situations?
- 13.A Corporate requests a Loan of EUR 1bn from its bank.What set up could the bank use to grant the Loan to the Corporate without taking on too much credit risk?
- 14.An investor holds a portfolio of large European Corporates. List few methods he can use to mitigate his credit risk.
- 15.In the FormulaAccrued Interest = PV(Premium) x Dp / 2Can you explain why we use Dp in the formula?Why do we divide by 2?
- 16.What are benefits of using Credit Indices?
- 17.What is Rating the limit for Investment Grade?
- 18.Which bond has the lowest seniority?
- A.
Senior
- B.
Subordinated
- C.
Convertible
- D.
Equity
- 19.If a CDS quotes 225bps, can you estimate the Default Probability of the underlying name?
- 20.A 5Y corporate CDS quotes 180bps, what's the survival probability implied by this level over 5 years?
- 21.How many different bonds are required to calculate Semi annual default probabilities over 3 years?
- 22.We sold 5m CDS 5y @ 238. The next day the CDS quotes 250. What's the Pnl on the trade?
- 23.We enter into a 5m long/short between VW and Benz. The 5Y VW CDS quotes 160bps, 5Y Benz 90.What's the expected profit on the strategy?
- 24.A CDS 5Y quotes 150bps. A investor wants to buy 5m of this CDS but pay the fee upfront, on trade date. What would you say is a fair price for the upfront fee?
- 25.
The table is the Annual transition rates. If you hold a BB bond, what is the probability your bond will default next year?
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