Financial Risk Manager Part 1
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A credit risk analyst is analyzing an individual loan. The exposure amount at default of this loan is assumed to be $10 million. Based on the historical data, the analyst has estimated the following:
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The probability of default is 5%.
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The loss given default (in dollar) is $7 million.
Further, the analyst has computed the Value-at-Risk (VaR) for this loan, which equals $2 million. What is the expected loss and unexpected loss of this loan?
A credit risk analyst is analyzing an individual loan. The exposure amount at default of this loan is assumed to be $10 million. Based on the historical data, the analyst has estimated the following:
-
The probability of default is 5%.
-
The loss given default (in dollar) is
$7million.
Further, the analyst has computed the Value-at-Risk (VaR) for this loan, which equals $2 million. What is the expected loss and unexpected loss of this loan?
Exam-Like
A
The expected loss is $350,000, while the unexpected loss is $2,000,000.
B
The expected loss is $350,000, while the unexpected loss is $1,650,000.
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