What is economic capital of the commercial loan portfolio

Reference no: EM132172999

Question - Suppose ExBank's risk analysts have estimated that the expected default rate on a commercial loan portfolio is 10%. The portfolio currently contains $500 million in commercial loan assets. Estimated recovery rates on the portfolio are 65%. The volatility associated with commercial defaults is 6%. Assume the adverse volatility factor is 1.96 and a 10 day VaR. Using what you know already for how to calculate VaR, what is the economic capital of the commercial loan portfolio?

Reference no: EM132172999

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