From Table 11A-1, what is the probability of a loan upgrade? A loan downgrade?
The probability of an upgrade is 5.95% + 0.33% + 0.02% = 6.30%. The probability of a downgrade is 5.30% + 1.17% + 0.12% = 6.59%.
a. What is the impact of a rating upgrade or downgrade?
b. How is the discount rate determined after a credit event has occurred?
c. Why does the probability distribution of possible loan values have a negative skew?
d. How do the capital requirements of the CreditMetrics approach differ from those of the BIS and Federal Reserve System?
This question was answered on: Jul 11, 2017
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