Difference between base correlation and compound correlation

Reference no: EM131240296

1. Suppose that in a one-factor Gaussian copula model the 5-year probability of default for each of 125 names is 3% and the pairwise copula correlation is 0.2. Calculate, for factorvalues of 2, 1, 0, 1, and 2:

(a) the default probability conditional on the factor value and

(b) the probability of more than 10 defaults conditional on the factor value.

2. Explain the difference between base correlation and compound correlation.

Reference no: EM131240296

Questions Cloud

What conditions should the learning rate be increased : Many training methods in which the learning rate is not constant throughout the process are known. Under what conditions should the learning rate be increased and when should it be reduced?

Design experiments to confirm or negate this theory : At the end of training after the network acquires a lot of knowledge, a slower learning rate is advisable, so that incidental mistakes (caused by a few challenges in the training set) do not spoil the result since improvement of one area produces ..

Plot showing what minimal values of momentum are needed : Design and conduct some experiments to generate a plot showing what minimal values of momentum are needed for different values of learning rate to guarantee fast and stable training.

Design and make a model of an animal with more receptors : Designing and observing a neural network as the brain of an animal may be a fascinating intellectual adventure.

Difference between base correlation and compound correlation : Calculate, for factorvalues of 2, 1, 0, 1, and 2: the default probability conditional on the factor value and the probability of more than 10 defaults conditional on the factor value.

Why a self-learning neural network might be useful : What determines whether points representing neurons in Example 10a will be blue or red?

Difference between a total return swap and an asset swap : Does valuing a CDS using real-world default probabilities rather than risk-neutral default probabilities overstate or understate its value? Explain your answer.

Do we observe similar phenomena in animal brains : For example, a young puppy has a brain that can be modeled by a network with a very high etha value. Its brain is different from the brain of an older dog (whose etha value may approach zero). Present the positive and negative views of this concep..

Potential asymmetric information prob in credit default swap : Explain how forward contracts and options on credit default swaps are structured. - Why is there a potential asymmetric information problem in credit default swaps?

User Account

All Pages