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Assume that your bank underwrote 5 loans to various hedge funds based in Cayman Islands each valued at $1M. The PDs (5% each) of each

Assume that your bank underwrote 5 loans to various hedge funds based in Cayman Islands each valued at $1M. The PDs (5% each) of each hedge fund are independent of each other and follow a binomial distribution. Assume that recovery rate is 30% for each loan. What is the 99.9% Credit Value at Risk (CVAR)? Please explain each step in your calculation.

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