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Answer: D
NEW QUESTION: 2
Consider the following code:
<film>
<year>1942</year>
<title>Casablanca</title>
<director>Michael Curtiz</director>
</film>
What kind of code is shown in the preceding example?
A. activescript
B. XML
C. VBScript
D. HTML
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NEW QUESTION: 3
Under the credit migration approach to assessing portfolio credit risk, which of the following are needed to generate a distribution of future portfolio values?
A. A specified risk horizon
B. The forward yield curve
C. A rating migration matrix
D. All of the above
Answer: D
Explanation:
Explanation
The credit migration approach to assessing portfolio credit risk involves obtaining a distribution of future portfolio values from the ratings migration matrix. First, the frequencies in the matrix are used as probabilities, and expected future values of the securities belonging to each rating category are calculated. These are then discounted to the present using the discount rate appropriate to the 'future' rating category. This gives us a forward distribution of the value of each security in the portfolio. These are then combined using the default correlations between the issuers. The default correlation between the issuers is often proxied using asset returns, and recognizing that default occurs when asset values fall below a certain threshold. A distribution for the future value of the portfolio is generated using simulation, and from this distribution the Credit VaR can be calculated.
Thus, we need the migration matrix, the risk horizon from which the present values need to be calculated, and the forward yield curve or the discount curve for each rating category for the risk horizon. Thus, Choice 'd' is the correct answer.
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