1. Suppose that in a one-factor Gaussian copula model the 5-year probability of default for each of 125 names is 3% and the pairwise copula correlation is 0.2. Calculate, for factorvalues of 2, 1, 0, 1, and 2:
(a) the default probability conditional on the factor value and
(b) the probability of more than 10 defaults conditional on the factor value.
2. Explain the difference between base correlation and compound correlation.