问题如下:
A portfolio consists of two bonds, Bonds A and B. The credit VaR for the portfolio is defined as the maximum loss due to defaults at a confidence level of 98% over a one-year horizon. The probability of joint default of the two bonds is 1.32%, and the default correlation is 35%. The bond value, default probability, and recovery rate are USD 1.2 million,4%, and 60%, respectively for Bond A, and USD $800,000, 5%, and 35%, respectively for Bond B. What is the expected credit loss for the portfolio?
选项:
A.$45,200.
B.$15,820.
C.$42,800.
D.$26,400.
解释:
A The joint expected credit loss is the sum of the two individual expected credit losses.
EL = PD x exposure x LGD
EL Bond A = $1,200,000 x 0.04 x 0.40 = $19,200
EL Bond B = $800,000 x 0.05 x 0.65 = $26,000
Total EL = $45,200
Note that expected credit loss does not depend on the correlation between the bonds.
expected credit loss不是credit loss么,不需要用wcl-el么