Scott Is a Credit Analyst with One of the Credit

question 15

Multiple Choice

Scott is a credit analyst with one of the credit rating agencies in India. He was looking in Oil and Gas Industry companies and has presented brief financials for following 4 entities: From the data given below, calculate the standard deviation of the credit portfolio assuming that facility's exposure is known with certainty, customer defaults and LGDs are independent of one another and LGDs are independent across borrower(s) . Credit Facility A - Loss Equivalent Exposure of $60m, expected Default frequency of 1.5%, loss given default of 30%, Std Deviation of LGD - 5% and Correlation to portfolio - 0.10 Credit Facility B - Loss Equivalent Exposure of $25m, expected Default frequency of 2%, loss given default of 12%, Std Deviation of LGD - 12% and Correlation to portfolio - 0.45 Credit Facility C - Loss Equivalent Exposure of $15m, expected Default frequency of 5%, loss given default of 85%, Std Deviation of LGD - 18% and Correlation to portfolio - 0.22

• A) US$6.88 million
• B) US$ 1.16 million
• C) US$ 1.66 million
• D) US$ 0.10 million

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Definitions:

Behaviorism

A branch of psychology that studies observable behavior, emphasizing the role of environmental factors in shaping behavior, excluding subjective factors like feelings or motives.

Functionalism

A psychological perspective that considers mental life and behavior in terms of active adaptation to the person's environment.

Structuralism

An early school of psychology that aimed to analyze the structure of the mind by breaking down mental processes into their basic components.

Humanism

A philosophical and ethical stance that emphasizes the value and agency of human beings, individually and collectively, often emphasizing human reason, ethics, and justice.