Study session 14 - Cross-Reference to CFA Institute Assigned Reading #45 - Credit Analysis Models Flashcards
0
Q
Present value of expected loss=
A
value of a credit-risky bond - identical risk-free bond
1
Q
Loss given default (%)
A
100 - Recovery rate
2
Q
credit spread=
A
YTM of a credit-risky zero coupon bond - YTM of a risk-free zero coupon bond
3
Q
Value of stock(t)=
Value of debt(t)=
A
Max (0, At-K)
Min (At, K)
At= value of assets at time T K= facevalue of debt
4
Q
Value of risky debt=
A
value of risk-free debt- value of put option on company’s assets
5
Q
The issuer-pays model in credit ratings mays cause a conflict of interest between _______ & ________
A
rating agencies & usersof ratings (subscribers), not between rating agencies and issuers
