2

# Consider two credits D1 and Dz Assume that the survival of the credit is dependent on a latent variable A;~N(O, 1). Specifically, a default occurs before time Tif t...

## Question

###### Consider two credits D1 and Dz Assume that the survival of the credit is dependent on a latent variable A;~N(O, 1). Specifically, a default occurs before time Tif the value of A; is less than a time dependent threshold C; (T) ie-,P(t <T) = P(A; < C(T)) =1-Q (t)Here, Q;(T) is the time T survival probability of credit implied by the CDS market: Consider the following _ one-factor model:Ai = B+z + I1 - Bzewhere Z~N(O,1) is the market factor and &~N(O,1) are the idiosyncratic factors spec

Consider two credits D1 and Dz Assume that the survival of the credit is dependent on a latent variable A;~N(O, 1). Specifically, a default occurs before time Tif the value of A; is less than a time dependent threshold C; (T) ie-, P(t <T) = P(A; < C(T)) =1-Q (t) Here, Q;(T) is the time T survival probability of credit implied by the CDS market: Consider the following _ one-factor model: Ai = B+z + I1 - Bze where Z~N(O,1) is the market factor and &~N(O,1) are the idiosyncratic factors specific to each credit: Within this framework; there are no explicit = spread dynamics. The only events that we can observe are the defaults of credits_ A credit can have spread dynamics when we condition on the default and survival behavior of the other credits to which this credit is correlated, .If Di defaults at future time T1 and it has non-zero asset correlation with Dz, then we would expect this default to have an impact on the conditional default probability of Dz. We denote the default time for credit B as Tz and the correlation between credits as p Calculate Q2(t,T) the forward survival curve for a credit Dz conditional on default of credit Di at time and compare Qz(t,T) with Qz(t,T) the unconditional forward survival curve_ Please comment on the relationship. Assume that the initial CDS spread for credit D is flat at 60 bps, the CDS spread for credit Dz is flat at 120 bps and the recovery rate is R = 40% for both credits. Calculate the forward spread curve of credit Dz conditional on default of credit D at time t e(0,5). Plot the calculated forward spreads for correlation between assets P â‚¬ {-0.5,-0.25,0,0.25,0.5}. Discuss the relationship between the conditional spread curve of credit Dz and the asset correlation p_  #### Similar Solved Questions

##### 3) Temperature, Pressure and inert effects. Sulfur trioxide is formed by oxidation of sulfur dioxide over a catalyst:SO2 1/202 SOz g) g) g)Using the following data, calculate changes in enthalpy, entropy and Gibbs free energy associated with this reaction at 600 C, atmAH298 (kcallmol) 70.96 -94.4546 298 (kcallmol) -71.79 -88.52Cp (callmol K)SOz SOz 027.7+0.0051 T 6.7 + 0.018 T 7.2b) Calculate the equilibrium constant at this temperatureA feed stream containing equimolar proportions of SOz, 02z,
3) Temperature, Pressure and inert effects. Sulfur trioxide is formed by oxidation of sulfur dioxide over a catalyst: SO2 1/202 SOz g) g) g) Using the following data, calculate changes in enthalpy, entropy and Gibbs free energy associated with this reaction at 600 C, atm AH298 (kcallmol) 70.96 -94.4...
##### A table of values for the function f(x) is given below:f(x)2.5 2.9 6.1 2.99 6.08 2.999 6.02 2.99999 6.003Provide an educated guess about what the Ilm f(x)is: X-3"
A table of values for the function f(x) is given below: f(x) 2.5 2.9 6.1 2.99 6.08 2.999 6.02 2.99999 6.003 Provide an educated guess about what the Ilm f(x)is: X-3"...
##### The 6 the what Anlideal intial pressure 135 Number factor gas Number pressure will decteaseh Ml was the byy to WIR 137 W li alm sanef whal increase? efaccr Ifrom 9.00 the final to 22.5L pressure? at constant temperalure_
The 6 the what Anlideal intial pressure 135 Number factor gas Number pressure will decteaseh Ml was the byy to WIR 137 W li alm sanef whal increase? efaccr Ifrom 9.00 the final to 22.5L pressure? at constant temperalure_...
##### [7 marks] A solid D is bounded above and below by the spheres centered at the origin of radius 2 and 1, respectively, and on the sides by the cone Vt? +y2. The density of the solid at a point (T,y,2) is equal to its distance from the origin; that is, 6(â‚¬,y; 2) Vt? +42 + 22 Determine the total mass M of the solid. Hint: change of coordinates might help_ (b) Determine the center of mass of the solid_
[7 marks] A solid D is bounded above and below by the spheres centered at the origin of radius 2 and 1, respectively, and on the sides by the cone Vt? +y2. The density of the solid at a point (T,y,2) is equal to its distance from the origin; that is, 6(â‚¬,y; 2) Vt? +42 + 22 Determine the total ...
#####  Give missing products and reagents in the following sequenceHBr, lightMeMe MeMgBracidalcoholalkeneBromideMg 2 aldehyde D3. oxidationMePhalcohol E 4.organometalMeMe
 Give missing products and reagents in the following sequence HBr, light Me Me MeMgBr acid alcohol alkene Bromide Mg 2 aldehyde D 3. oxidation Me Ph alcohol E 4.organometal MeMe...
##### Example 3 Find " the average value of f (x) = 4 ~ x2 on the Interval [-2 , 2]. Draw Braph t0 illustrate the result:"/divstiriua "ar (Jk bne (
Example 3 Find " the average value of f (x) = 4 ~ x2 on the Interval [-2 , 2]. Draw Braph t0 illustrate the result: "/divstiriua "ar (Jk bne (...
##### Determine the values of a for which the system has no solutions, exactly one solution, or infinitely many solutions_x+2y- 2 2 =3 3x - y + 2z = 3 4x+y+ (a _ 9)z=a+3For a =there is no solutionFor a =there are infinitely many solutions_For a # #the system has exactly one solution:
Determine the values of a for which the system has no solutions, exactly one solution, or infinitely many solutions_ x+2y- 2 2 =3 3x - y + 2z = 3 4x+y+ (a _ 9)z=a+3 For a = there is no solution For a = there are infinitely many solutions_ For a # # the system has exactly one solution:...
##### 13: In a new method for determining selenourea in water the following values were obtained for tap water samples spiked with 50 ng/mL of selenourea: 50.4, 50.7 , 49.1, 49.0, 51.15 nglmL Is there any evidence of systematic error?
13: In a new method for determining selenourea in water the following values were obtained for tap water samples spiked with 50 ng/mL of selenourea: 50.4, 50.7 , 49.1, 49.0, 51.15 nglmL Is there any evidence of systematic error?...
##### In the silver plating of copper, $mathrm{K}left[mathrm{Ag}(mathrm{CN})_{2}ight]$ is used instead of $mathrm{AgNO}_{3}$. The reason is(a) less availability of $mathrm{Ag}^{+}$ions, as $mathrm{Cu}$ cannot displace Ag from $left[mathrm{Ag}(mathrm{CN})_{2}ight]^{-}$ion(b) more voltage is required(c) a thin layer of $mathrm{Ag}$ is formed on $mathrm{Cu}$(d) $mathrm{Ag}^{+}$ions are completely removed from solution
In the silver plating of copper, $mathrm{K}left[mathrm{Ag}(mathrm{CN})_{2} ight]$ is used instead of $mathrm{AgNO}_{3}$. The reason is (a) less availability of $mathrm{Ag}^{+}$ions, as $mathrm{Cu}$ cannot displace Ag from $left[mathrm{Ag}(mathrm{CN})_{2} ight]^{-}$ion (b) more voltage is required (c...
##### 6. The figure below refers to the determination of a bacteriophage titer (pfulml) Given the information, determine the titer of the original phage sample. (3 points)=a plaque-forming unit1.Oml0.Iml1.Oml9 Oml99m|9 Omlphaee stoct0.Iml1.0ml1.OmlTNTC#1#2#3
6. The figure below refers to the determination of a bacteriophage titer (pfulml) Given the information, determine the titer of the original phage sample. (3 points) =a plaque-forming unit 1.Oml 0.Iml 1.Oml 9 Oml 99m| 9 Oml phaee stoct 0.Iml 1.0ml 1.Oml TNTC #1 #2 #3...
##### Explain carefully why the futures price of gold can be calculated from its spot price and other observable variables whereas the futures price of copper cannot.
Explain carefully why the futures price of gold can be calculated from its spot price and other observable variables whereas the futures price of copper cannot....
##### Quesqon 41Qts134. A tennis ball of mass 0.06 kg hits a wall with _ speed of 50 m/s and rebounds with a speed of 45 m/s The collision lasts for 0.002 seconds What is the magnitude of the average force exerted on the terinis ball by the wall? (Enter the number only:)BeloreAler
Quesqon 41 Qts 134. A tennis ball of mass 0.06 kg hits a wall with _ speed of 50 m/s and rebounds with a speed of 45 m/s The collision lasts for 0.002 seconds What is the magnitude of the average force exerted on the terinis ball by the wall? (Enter the number only:) Belore Aler...
##### Let $x$ represent the number. Use the given conditions to write an equation. Solve the equation and find the number.A number increased by 40 is equal to $450 .$ Find the number.
Let $x$ represent the number. Use the given conditions to write an equation. Solve the equation and find the number. A number increased by 40 is equal to $450 .$ Find the number....
##### A characteristic of an Op amp is high input impedance and lowoutput impedance True or false
A characteristic of an Op amp is high input impedance and low output impedance True or false...
##### It is desired to determine a tolerance interval that covers 95%of the diameters of the caps of the Burethral product with 90%confidence. With this objective, the area engineer took a sample of125 articles finding the following: average = 2.58 cm, the standarddeviation is 0.75 cm., Median = 2.61 cm, min = .78 cm and the max =4.26 cm, all the estimates for the diameter of the Burethral cap.The engineer determined with this information that the LowerTolerance is .78 cm, and the Upper Tolerance is 4
It is desired to determine a tolerance interval that covers 95% of the diameters of the caps of the Burethral product with 90% confidence. With this objective, the area engineer took a sample of 125 articles finding the following: average = 2.58 cm, the standard deviation is 0.75 cm., Median = 2.61 ...