In the Moody's Analytics Portfolio Model, the Risk of a Loan

question 1

Multiple Choice

In the Moody's Analytics portfolio model, the risk of a loan measures

• A)the product of the estimated loss given default and risk-free rate on a security of equivalent maturity.
• B)annual all-in-spread minus the loss given default.
• C)annual all-in-spread minus the expected default frequency.
• D)the product of the expected default frequency and the estimated loss given default.
• E)the volatility of the loan's default rate around its expected value times the amount lost given default.

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Definitions:

Exchange Floor

The physical location where traders buy and sell securities or commodities within a financial exchange.

Orderly Market

A market condition in which prices move in a smooth and predictable manner, without excessive volatility or gaps in trading prices.

Over-the-Counter Market

A decentralized market where participants trade stocks, bonds, currencies, and other financial instruments directly between two parties without a central exchange or broker.

New York Stock Exchange

A major global securities exchange located in New York City, where stocks are bought and sold.