Credit & Counterparty Risk Screen
Expected loss, exposure, netting, wrong-way risk and CVA the objective core of a credit and counterparty-risk screen.
The scenario
You've joined the credit-risk team. A loan book needs its expected loss sizing, a derivatives counterparty needs its exposure measured after netting, and the desk wants to add risk to a weak name. Work each figure precisely and reason about what actually reduces the exposure.
Where this shows up
Expected loss (PD, LGD, EAD), exposure after netting, wrong-way risk and CVA are the staple objective content of credit and counterparty-risk assessments, testing accuracy and definitions rather than opinion.
Firms such as HSBC, Barclays, JPMorgan.
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The drill
Answer each item. Numeric answers are graded to a small tolerance. Every convention you need (the EL formula, LGD from recovery, exposure as a replacement cost, independence of annual default) is stated in the prompt.
Sample question
A loan has PD = 2%, LGD = 40% and EAD = 5,000,000. Using expected loss = PD x LGD x EAD, what is the expected loss, in pounds?
Included with the Risk pack
The full graded drill is part of the Risk (Market, Credit & Model Risk) pack a one-time purchase unlocks every concept, coding guide, interview playbook and take-home in this track.
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