Quant-I

its.ruchi2006
Posts: 6
Joined: Tue Jul 16, 2013 5:33 pm

Quant-I

Postby its.ruchi2006 » Tue Jul 16, 2013 5:40 pm

A credit risk manager of Esta bank is reviewing the credit risk of EUR 400000 loan to Kidco, which is a subsidiary of Pattern Inc. Assume that Kidco will default if Pattern Inc default but Pattern will not necessarily default if Kidco defaults.
If POD of Pattern Inc is 1%, POD of Kidco is 5%
Given that Pattern Inc does not default, what is the prob that Kidco defaults in next year

(A) 5%
(B) 6%
(C) 5.95%
(D) 4.95%

User avatar
shreyas
Finance Junkie
Posts: 83
Joined: Thu Jul 19, 2012 6:49 pm

Quant-I

Postby shreyas » Mon Jul 22, 2013 6:25 am

P( kidco default|pattern not defaulting)=0.99*0.05=0.0495=4.95%


Return to “FRM Part I”



Disclaimer

Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to abuse@edupristine.com and we will rectify it.