User Account

All Pages

Compute the cva and the credit spread of bond

Assignment Help Finance Basics
Reference no: EM132847426

1. A 4-year corporate bond pays a coupon of 6% per year. The term structure of risk-free interest rates is flat at 3% (annual) and is expected to stay unchanged in the future. If the risk neutral conditional probability of default of this company is 1.5% for a 1-year period and the recovery rate in event of default is 35% (assumed constant)
Compute the CVA and the credit spread of this bond

2. A 4-year zero coupon bond issued by a company with a hazard rate of 2.5%. The recovery rate of the bond if the company defaults is 60%. The benchmark risk free rate is 4.5%. Compute the CVA for the corporate bond.

3. Give two examples of when (a) wrong-way risk and (b) right-way risk can be expected to be observed.

4. "DVA can improve the bottom line when a bank is experiencing financial difficulties." Explain why this is so.

Reference no: EM132847426

Questions Cloud

Identify level of responsibility required : In a short report you are required to comment on two work tasks you have completed in a financial services environment. For example:
Calculate the cost of common stock equity : Calculate the cost of common stock equity using the capital asset pricing model (CAPM), the cost of debt (after tax), and the weighted average cost of capital
Determining the balance of the account : What will the balance of the account be at the end of five years?
Determining the bond maturity time : A company offers a bond with a current market price of $1,200, a coupon rate of 8 percent, and a yield to maturity of 6 percent. The face value is $1,000. Inter
Compute the cva and the credit spread of bond : A 4-year corporate bond pays a coupon of 6% per year. The term structure of risk-free interest rates is flat at 3% (annual) and is expected to stay
Book and liquidation value : 1. Preferred stock can be liquidated at book value. The balance sheet for Gallinas Industries is as? follows, table:
What are the types of offshore banking institutions : 1) What are the types of offshore banking institutions? How do they differ from each other?
Determine the sum of the equivalent : Given a nominal discount rate of 8% convertible semiannually, determine the sum of the equivalent:
Implication of the expectations theory : The implication of the expectations theory that expected returns for a holding period must be the same for bonds of different maturities depends on the assumpti

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd