riskmanagementhw3

riskmanagementhw3 - credits, it corresponds to an...

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Credit rating & Credit Lyonnais 1. C. Baa3 is the lowest rating 2. A. The cutoff point for pre-tax interest coverage ratio in the table for industrial financial ratios is 3.7 for BBB credits, which is similar to the ratio of 3.6 for company X. More importantly, the long-term debt/equity ratio of 35% for company X translates into long-term debt/capital ratio of 26%(obtained as 35%/(1+35%)=26%). As this is well below the cutoff point of 40.8% for BBB-
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Unformatted text preview: credits, it corresponds to an AAA-rating. 3. D. Empirically, the ratio of debt to exports seems to be the most important factor driving sovereign ratings. 4. C 5. b 6. a 7. c 8. c, a,d,b 9. a & c. Both Historical default frequencies approach and conservative option approach are the two approaches to derive EL-based risk weights 10. e 11. a 12. c 13. e 14. a...
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