The file I am sending you, contains everything you need for the solution. The goal of this assignment, is in page 16. You have to use these numbers and some of the formulas including here, to replicate the figures in page 12. The final figures should be similar to the figures in page 12. In the end, I want an Excel file with the numbers and the formulas(with nice tables etc) WITH explanations what you used to derive the figures.
Assignment description-
-maturity T = 5 years
-interest rate r = 0%
-recovery rate R = 40%
-average dirty spread s = 35 bp
-average clean spread λ = s/(1-R)
-term default probability p-T = 1 - e-λT
| Tranche |
Equity |
BBB |
AAA |
Junior |
Senior |
| Range |
0-3% |
3-6% |
6-9% |
9-12% |
12-22% |
| Spread (bp) |
1027 |
106 |
43 |
27 |
17 |
Replicate the figure on page 12.
Attachment:- Credit Risk.rar