4/16/25, 1:04 AM Gurleen Bajwa - AFF811/FIN801 011 - Financial Risk Management - W2025 - Toronto Metropolitan University
Review Quiz 9 - Results X
Attempt 1 of 1
Written Apr 2, 2025 5:31 PM - Apr 2, 2025 5:51 PM
Attempt Score 106.25 %
Overall Grade (Highest Attempt) 106.25 %
Question 1 points
A bank has a pool of sovereign loans that has an EAD of $55M, an average
default probability of 0.76%, an expected recovery rate of 35%, and an
average maturity of 3.5 years. Under the IRB, what is the specified default
correlation for this loan pool?
Note: Your answer must be expressed in decimal form and be accurate to
within 0.0001.
Answer:
0.2021 v
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The specified default correlation is given by:
rho = .12 x (1 + exp(-50 x Default probability))
https://courses.torontomu.ca/d2l/Ims/quizzing/user/quiz_submissions_attempt.d21?isprv=&Qqi=441872&ai=10654672&isInPopup=0&cfql=-0&fromQB=0&... 1/7
, 4/16/25, 1:04 AM Gurleen Bajwa - AFF811/FIN801 011 - Financial Risk Management - W2025 - Toronto Metropolitan University
Question 2 points
A bank has a pool of small business loans that has an EAD of $64M, an
average default probability of 2.23%, an expected recovery rate of 50%, and
an average maturity of 1.5 years. The firms in this pool have average sales of
36 million Euro. Under the IRB, what is the specified default correlation for
this loan pool?
Note: Your answer must be expressed in decimal form and be accurate to
within 0.0001.
Answer:
0.1469 v
w Hide question 2 feedback
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The specified default correlation is given by:
rho =.12 x (1 + exp(-50 x Default probability)) - .04 x (50M - Sales in
Euros) / 45M
Question 3 points
A bank has a pool of corporate loans that has an EAD of $56M, an average
default probability of 0.90%, an expected recovery rate of 60%, and an
average maturity of 1.8 years. Under the IRB, what is the specified maturity
adjustment for this loan pool?
Note: Your answer must be expressed in decimal form and be accurate to
within 0.001.
Answer:
1.144 v
https://courses.torontomu.ca/d2l/Ims/quizzing/user/quiz_submissions_attempt.d21?isprv=&Qqi=441872&ai=10654672&isInPopup=0&cfql=-0&fromQB=0&... 2/7
Review Quiz 9 - Results X
Attempt 1 of 1
Written Apr 2, 2025 5:31 PM - Apr 2, 2025 5:51 PM
Attempt Score 106.25 %
Overall Grade (Highest Attempt) 106.25 %
Question 1 points
A bank has a pool of sovereign loans that has an EAD of $55M, an average
default probability of 0.76%, an expected recovery rate of 35%, and an
average maturity of 3.5 years. Under the IRB, what is the specified default
correlation for this loan pool?
Note: Your answer must be expressed in decimal form and be accurate to
within 0.0001.
Answer:
0.2021 v
w Hide question 1 feedback
Feedback
The specified default correlation is given by:
rho = .12 x (1 + exp(-50 x Default probability))
https://courses.torontomu.ca/d2l/Ims/quizzing/user/quiz_submissions_attempt.d21?isprv=&Qqi=441872&ai=10654672&isInPopup=0&cfql=-0&fromQB=0&... 1/7
, 4/16/25, 1:04 AM Gurleen Bajwa - AFF811/FIN801 011 - Financial Risk Management - W2025 - Toronto Metropolitan University
Question 2 points
A bank has a pool of small business loans that has an EAD of $64M, an
average default probability of 2.23%, an expected recovery rate of 50%, and
an average maturity of 1.5 years. The firms in this pool have average sales of
36 million Euro. Under the IRB, what is the specified default correlation for
this loan pool?
Note: Your answer must be expressed in decimal form and be accurate to
within 0.0001.
Answer:
0.1469 v
w Hide question 2 feedback
Feedback
The specified default correlation is given by:
rho =.12 x (1 + exp(-50 x Default probability)) - .04 x (50M - Sales in
Euros) / 45M
Question 3 points
A bank has a pool of corporate loans that has an EAD of $56M, an average
default probability of 0.90%, an expected recovery rate of 60%, and an
average maturity of 1.8 years. Under the IRB, what is the specified maturity
adjustment for this loan pool?
Note: Your answer must be expressed in decimal form and be accurate to
within 0.001.
Answer:
1.144 v
https://courses.torontomu.ca/d2l/Ims/quizzing/user/quiz_submissions_attempt.d21?isprv=&Qqi=441872&ai=10654672&isInPopup=0&cfql=-0&fromQB=0&... 2/7
