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Calculate the probability of joint default

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A portfolio consists of two bonds. The bond value, default probability, and recovery rate are USD $1,000,000,1%, and 60% for one bond, and USD $400,000, 5%, and 30% for the other. The default correlation of the two bonds is 15%.

1) Calculate the probability of joint default

2) Calculate the expected credit loss for the portfolio

3) Calculate the credit VaR for the portfolio at confidence levels from 99%-95%

Reference no: EM133111185

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