Suppose that a bank has a total of $10 million of small exposures of a certain type.
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Suppose that a bank has a total of $10 million of small exposures of a certain type. The one-year probability of default is 1%and the recovery rate averages 40%. Estimate the 99.5% one-year credit VaR using Vasicek’s model if the copula correlation parameter is 0.2.
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