During recessions the correlation between recovery rates and default
probabilities has traditionally been:
A) Positive
B) Negative
C) Zero
D) Linear
答案:B
解析:During recessions the correlation between recovery rates and default
probabilities has traditionally been negative. During recessions the amount
recovered declines as the probability of default increases.
Given the PD for an AA-rated company over a two-year period is 0.2%, then the
most likely PD for this company over a 4-year period
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A) 0.2%
B) Between 0.2% and 0.4%
C) 0.4%
D) Greater than 0.4%
答案:D
解析:For investment-grade credits, the increase of cumulative default
probability is more than proportional with the horizon.