1. You are given the following table of the one-year forward zero curves for eaclh credit rating: Category | Year 1 (96) | Year 2 (90) | Year 3 (90) | Year 4 (%) | Year 5 (%) AAA 3.40 3.50 3.60 4.21 5.23 8.75 14.25 3.80 4.10 4.55 5.89 6.89 9.22 15.65 4.21 5.12 5.19 6.24 7.58 10.52 16.88 5.13 5.48 5.90 6.99 8.05 11.25 17.99 5.99 6.89 7.58 8.52 9.78 12.33 18.15 You have a portfolio of 2 bonds. One is BBB rated 6-year senior unsecured bond with the face value of $20 million and the coupon rate of 4% per annum paid annually. The other is B rated junior subordinated 6-year bond with the face value of $10 million and the coupon rate of 5% per annum paid annually. Except the one-year forward zero curves (given above), all other information are the given in the lecture notes. Assume the standardized asset returns of both bonds follow multivariate normal distribution. The means and standard derivation of their standardized returns are both 0 and 1 respectively. The correlation of their standardized asset returns is-0.15 Using CreditMetrics model, find the 1-year 99% credit VaR of this portfolio by using 10,000 simulations. 1. You are given the following table of the one-year forward zero curves for eaclh credit rating: Category | Year 1 (96) | Year 2 (90) | Year 3 (90) | Year 4 (%) | Year 5 (%) AAA 3.40 3.50 3.60 4.21 5.23 8.75 14.25 3.80 4.10 4.55 5.89 6.89 9.22 15.65 4.21 5.12 5.19 6.24 7.58 10.52 16.88 5.13 5.48 5.90 6.99 8.05 11.25 17.99 5.99 6.89 7.58 8.52 9.78 12.33 18.15 You have a portfolio of 2 bonds. One is BBB rated 6-year senior unsecured bond with the face value of $20 million and the coupon rate of 4% per annum paid annually. The other is B rated junior subordinated 6-year bond with the face value of $10 million and the coupon rate of 5% per annum paid annually. Except the one-year forward zero curves (given above), all other information are the given in the lecture notes. Assume the standardized asset returns of both bonds follow multivariate normal distribution. The means and standard derivation of their standardized returns are both 0 and 1 respectively. The correlation of their standardized asset returns is-0.15 Using CreditMetrics model, find the 1-year 99% credit VaR of this portfolio by using 10,000 simulations