How does the treatment of default in structural models and reduced-form models differ?
What will be an ideal response?
In structural models, default is endogenously determined within the economic model as its value depends on other variables in the model. In contrast, in reduced-form models default is exogenously determined being independent of other variables in the model. As it turns out, specifying defaults exogenously, as is done in reduced-form models, greatly simplifies credit risk modeling because it ignores the constraint of defining what causes default and simply looks at the default event itself. Pricing of corporate bonds with different maturities can be seen as independent, unlike structural models where defaults of longer maturity corporate bonds of an issuer are contingent on defaults of shorter-maturity corporate bonds of that same issuer.As with all economic models, structural and reduced-form models are merely an abstract simplified mathematical representation of relationships between economic variables.
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Juan, who does not work in HR but supervises the work of other employees, is a line manager.
Answer the following statement true (T) or false (F)
Write a paragraph giving at least five important tips on buying a new car
What will be an ideal response?
Fire and casualty insurance companies are what type of intermediary?
A) Contractual savings institution B) Depository institutions C) Investment intermediaries D) None of the above
A mutual fund's ____________________ ratio is a measurement of the various fees associated with the fund, such as operating costs, administrative fees, and management fees.
Fill in the blank(s) with the appropriate word(s).