Assume that the one-year probabilities of
default for the AAA- and BBB-rated bonds are 1% and 4%, respectively, and the joint probability of default of the two bonds is 0.07%. What is the default
correlation between the two bonds?
选项:
A.
0.03%
B.
1.54%
C.
78.91%
D.
The
default correlation cannot be calculated with the information provided.
解释:
B is correct.
考点:Default Correlation
解析:
From Equation:p(A and B)=Corr(A,B)p(A)[1−p(A)]×p(B)[1−p(B)]+p(A)p(B), the default correlation isCorr(A,B)=p(A)[1−p(A)]×p(B)[1−p(B)]p(A and B)−p(A)p(B)=0.01×(1−0.01)0.04×(1−0.04)0.0007−0.01×0.04=0.0154.
题目是否还需要说明 AAA- and BBB-rated bonds的违约概率均满足Bernoulli分布?