Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
(a) Presume we have a portfolio of n names with some default correlation ρ. The risk of the complete portfolio moves according to the change in default correlation. Alternatively if the portfolio is trenched according to the order of their defaults then a variety of tranches behave differently as ρ changes. For instance a high ρ indicates subsequent defaults occurring together where as a low ρ makes occurrence of subsequent defaults more or less independent.
(b) As default correlation raises the area under the middle part of the default density function decreases and the mass on the two extreme tranches increase. Therefore area under the subordinate tranche increases which means that the probability that the subordinate tranche loses all its money decreases. Therefore the risk for this tranche decreases along with the spread.
Alternatively the cushion for the senior tranches decreases as default correlation increases. Therefore it is more likely that the protection seller for the senior tranches will concede some losses.
Therefore the risk and hence the spread for this tranche increases.
(c) With a diminish in default correlation one should long on protection on the subordinate tranches and short on protection on the senior tranches.
Q. How cash flow problems arise? It is significant first to distinguish between profitability and cash availability. The key scheme relates to insolvency since even profitable
Types of Efficiency Efficient market theory can be described in three ways: 1) Allocative Efficiency: A market is allocatively proficient when it directs savings tow
FINANCIAL ISSUES OF DIVESTITURES Many corporations review the business portfolio to determine the operations that fit their core strategies. The firm's desire to achieve more f
Q. How to calculate correlation co-efficient? The correlation co-efficient measures the nature and the extent of relationship between the stock market index return and the stoc
Calculate the firm’s WACC. Prepare and analyze each planned capital expenditure. Evaluate, rank, and recommend the capital expenditures according to beneficial value to the organiz
Mistakes in Linton's evaluation (1) The preliminary investment in working capital should be offset by a working capital release in the final year, assuming a constant level of
Two companies are identical in all aspects except in the debt-equity profile. Company X has 14% debentures worth Rs. 25,00,000 whereas company Y does not have any debt. Both compan
Explain the risk-return relationship. The relationship among risk and required rate of return is known as the risk-return relationship. It is a positive relationship for the r
How are translation gains and losses handled in a different way as per to the current rate method in comparison to the other three techniques, which is the current/noncurrent metho
Historical Inflation and Stock Value Experience The experimental evidence denies the status of stocks as a good hedge against inflation. A study conducted by Ibbotson and Brins
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd