- Consider a 3-year, 4.00\% annual payment corporate bond. - The bond carries a certain amount of credit risk with an annual default probability of 2.00% (the hazard rate) given a recovery rate of 40%. " In the valuation interest rate volatility would have to be taken into account. The interest rate volatility is assumed to be 10% in government bond yields over the next few years. - Compute the CVA and price of the bond without the credit risk, and then use them to calculate the price of this risky bond, using the government par curve given in Exhibit 9 and the binomial interest rate tree in Exhibit 10. - Consider a 3-year, 4.00\% annual payment corporate bond. - The bond carries a certain amount of credit risk with an annual default probability of 2.00% (the hazard rate) given a recovery rate of 40%. " In the valuation interest rate volatility would have to be taken into account. The interest rate volatility is assumed to be 10% in government bond yields over the next few years. - Compute the CVA and price of the bond without the credit risk, and then use them to calculate the price of this risky bond, using the government par curve given in Exhibit 9 and the binomial interest rate tree in Exhibit 10