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?
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?