Do you all think we will have to have the equations memorized or just understand them?
• Probability of default = 1− e−lambda(T−t)
• Expected loss = K[1− e−lambda(T−t)]
• Present value of expected loss = KP(t,T) − D(t,T) = KP(t,T)[1− e−(T−t)]
Credit spread = Credit spread = yD(t,T) − yP (t,T) =
125mph
#2
Yes you might see this one as a concept question, or as a formula question.
Ok. The probability of default I know but the others i do not have memorized.
formula wise that’s all you need. Conceptually you need to understand everything regarding what you’ve listed