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Build out a CVA model. Assume 10 years. Recovery 50%. Risk free rate 2%. Default rate 3%. 1) What do you notice about the default

Build out a CVA model. Assume 10 years. Recovery 50%. Risk free rate 2%. Default rate 3%. 1) What do you notice about the default rate in year 10 vs year 1. What is the intuition behind that? 2) Raise the default rate to 5%. Compare the default rate in year 10 to the default rate in year 1. 3) What is the difference between the aggregated (cumulative) default rate in the two cases? Why does this make sense? 4) Compare the CVAs in both cases. Build out a CVA model. Assume 10 years. Recovery 50%. Risk free rate 2%. Default rate 3%. 1) What do you notice about the default rate in year 10 vs year 1. What is the intuition behind that? 2) Raise the default rate to 5%. Compare the default rate in year 10 to the default rate in year 1. 3) What is the difference between the aggregated (cumulative) default rate in the two cases? Why does this make sense? 4) Compare the CVAs in both cases

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