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Financial Risk Manager Part 1

Financial Risk Manager Part 1

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  1. A trainee analyst at a banking regulatory authority is participating in a course focused on the Vasicek model. While reviewing the equations associated with the model, the analyst comes across the following expressions:

Ui = aF + √(1-α²)zi

N⁻¹(PD) = aF

The default rate, expressed in terms of F, is provided by N(√(1-α²)).

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