QUESTION 6: I

f the CDS-bond basis is A minus B, what are A and B?

a. A is the excess of the bond yield over the Treasury rate and B is the CDS spread

b. A is the excess of the bond yield over the swap rate and B is the CDS spread

c. A is the CDS spread and B is the excess of the bond yield over the Treasury rate

d. A is the CDS spread and B is the excess of the bond yield over the swap rate

QUESTION 8:

.In the Gaussian copula model which of the following is true

a.

The time to default for a company is assumed to be lognormally distributed

b.

The time to default for a company is transformed to a lognormal distribution

c.

The time to default for a company is assumed to be normally distributed.

d.

The time to default for a company is transformed to a normal distribution

QUESTION 9:

J.P. Morgans CreditMetrics uses which of the following to estimate default correlations?

a.

The model uses correlations based on the correlations between equity returns of obligors.

b.

CreditMetrics does not estimate default correlations. The model assumes zero correlations between defaults.

c.

The model correlations are based on the historical correlations between defaulting corporate bond.

d.

Correlations in the model are estimated based on changes in corporate bond spreads to the treasury.