Basel Calculation

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1 point

Unexpected loss (UL) which is directly related to capital requirements is given by

UL = LGD * EAD

UL = (PDconditional - PDunconditional)

UL = (PDconditional - PDunconditional) * LGD * EAD

UL = (PDunconditional - PDconditional) * LGD * EAD

1 point

Based on the external rating of the counterparty rating weight for BB rating is

1.0%

2.0%

0.08%

1 point

What is PD?

Person Days

Profit given default

Probability of Default

Per Day

1 point

What are the different method used for modelling PD?

Qualitative Scorecards

Winter & Halts Method

Logistic Regression

Duration Method

1 point

if the default rate is 4.5% in a sample of 10,000 loan accounts, then total non default cases will be

9700

450

9800

1450

1 point

In Case of very low default estimator focuses on predicting

wholesale default

credit default

default

non-default

1 point

LGD/EAD are often modeled using

Generalized Linear Models

Linear Regressions

External Estimates

Historical Averages

1 point

What is LGD?

Loss Gross Default

Loss Grow Default

Loss Get Default

Loss Given Default

1 point

For firms that do not have sufficient data to estimate downturn LGD, a supervisory mapping function can be used as

LGD = 0.08

LGD = 0.08 + 0.92

LGD = 0.92 * Expected LGD

LGD = 0.08 + 0.92 * Expected LGD

10.

1 point

Stressed LGD Model Talks about

macroeconomic indicators, estimate default rates during these stressed conditions

Typical add-ons range between 2.5% to 5%

Many banks use qualitative add-ons to incorporate downturn risk, particularly for their first-generation models

Compare stressed LGD with their long run averages and derive a scaling factor to reflect downturn ris

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