Financial Risk Manager Part 1
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A risk manager on the corporate bond desk at an investment company is explaining the important metrics used to measure and manage the risks of bonds to a group of newly hired analysts. The manager describes the concepts of recovery rates and default rates. Which of the following statements is correct for the manager to make?
A risk manager on the corporate bond desk at an investment company is explaining the important metrics used to measure and manage the risks of bonds to a group of newly hired analysts. The manager describes the concepts of recovery rates and default rates. Which of the following statements is correct for the manager to make?
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A
Recovery rates follow lognormal distribution with a single mode, shaped by differences in the seniority levels among bonds from the same issuer.
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