Credit Risk Exam 16 April 2016

30 Questions | Total Attempts: 111

Credit Risk Exam 16 April 2016 - Quiz


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. 


    • B. 


    • C. 


    • D. 


  • 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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