旅人祈愿 · 2018年11月01日
I don't understand why VaR(equity) decreases when PD increases holding correlation constant.
VaR=Mean-Z*sigma. If PD increase , mean will decrease, thus VaR will decrease.
The instructor suggest that increase in PD will cause a decrease in standard deviation. I think that will only occur when the expected loss almost covers the entire equity trench.
品职答疑小助手雍 · 2018年11月02日
同学你好，首先Var等于的是mean-Z*sigama的绝对值，所以去掉绝对值之后一般都会变成Z*sigama-mean，而且mean那部分有时候相对Z*sigama会被忽略不计。
这时候equity在违约率高的时候价值波动率是很小的（基本都违约的），所以Z*sigama变小。var变小。
这个点主要还是因为一般来说mean相对Z*sigama经常会因为太小而被忽略。
旅人祈愿 · 2018年11月02日
In that case, I guess it has to assume that the increase in PD is significant, and the initial PD is relatively high. Because for example, if the initial PD is 0.001%, and it increases to 1%, I believe the VaR will increase for the quity trench in that case, right?
