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Bank capital allocation: Compute the Basel capital ratio for all mortgage loans and periods using the internal ratings based approach. Assume correlation at 15%. PDs
Bank capital allocation:
Compute the Basel capital ratio for all mortgage loans and periods using the internal ratings based approach. Assume correlation at 15%. PDs should be inferred from question 2A and LGDs are 90%. The exposures at default is standardised to one unit. Plot the average capital ratio by time in one chart. Provide your code, plots and analyse the output.
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