m14-credit-risk

M14 – Credit Risk: CFAI Practice Problems

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Question 1

A bond has a probability of default (POD) of 2%, a loss given default (LGD) of 60%, and an exposure at default of $1,000,000. The expected loss on this bond is closest to:

• A. $6,000
• B. $12,000
• C. $20,000

Answer

B. $12,000

$\text{Expected Loss}=\text{POD}\times \text{LGD}\times \text{Exposure}=0.02\times 0.60\times 1,000,000=\$12,000$

📖 Giải thích chi tiết

Expected loss (tổn thất kỳ vọng) là tổn thất trung bình dự kiến từ rủi ro tín dụng.

• POD = 2% (xác suất vỡ nợ)

• LGD = 60% (tỷ lệ tổn thất khi vỡ nợ) = 1 − Recovery rate

• Recovery rate = 40%

• A sai: $6,000 có thể nhầm dùng recovery rate thay LGD.

• B đúng: 0.02 × 0.60 × $1,000,000=$12,000.

• C sai: $20,000 = POD × Exposure, bỏ qua LGD (giả định LGD = 100%).

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Question 2

Which of the following factors most likely causes a bond’s credit spread to widen?

• A. An improvement in the issuer’s profitability and cash flow generation.
• B. A deterioration in macroeconomic conditions increasing default expectations.
• C. A decrease in the bond’s remaining maturity as it approaches par value.

Answer

B. A deterioration in macroeconomic conditions increasing default expectations.

Credit spreads widen when the perceived credit risk increases. Deteriorating macroeconomic conditions raise default expectations across the market, leading investors to demand higher compensation (wider spreads) for holding corporate bonds.

📖 Giải thích chi tiết

Credit spread chịu ảnh hưởng bởi nhiều yếu tố:

• Kinh tế vĩ mô xấu đi → POD tăng → spread rộng ra

• Tín dụng cá nhân xấu đi → downgrade → spread rộng

• Thanh khoản giảm → liquidity premium tăng → spread rộng

• A sai: Cải thiện lợi nhuận → credit quality tốt hơn → spread thu hẹp.

• B đúng: Kinh tế xấu → rủi ro vỡ nợ tăng → spread rộng.

• C sai: Maturity giảm thường làm spread thu hẹp (pull-to-par, giảm rủi ro).

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Question 3

A bond with a recovery rate of 35% has a loss given default (LGD) of:

• A. 35%
• B. 65%
• C. 100%

Answer

B. 65%

$\text{LGD}=1-\text{Recovery Rate}=1-0.35=0.65=65\%$

📖 Giải thích chi tiết

LGD (Loss Given Default) và Recovery Rate có quan hệ bổ sung:

• LGD + Recovery Rate = 100%

• Recovery Rate = phần trăm vốn thu hồi được khi vỡ nợ

• LGD = phần trăm vốn bị mất khi vỡ nợ

• A sai: 35% là recovery rate, không phải LGD.

• B đúng: LGD = 1 − 35% = 65%.

• C sai: LGD = 100% chỉ khi recovery rate = 0 (mất toàn bộ).

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Question 4

In the credit rating system used by major rating agencies, a bond rated “BBB−” (or Baa3) is best described as:

• A. A speculative-grade bond with moderate credit risk.
• B. The lowest investment-grade rating before entering speculative territory.
• C. A high-quality bond with minimal risk of default.

Answer

B. The lowest investment-grade rating before entering speculative territory.

BBB− (S&P/Fitch) or Baa3 (Moody’s) is the lowest investment-grade rating. Bonds rated BB+ (Ba1) or below are classified as speculative-grade (high-yield or “junk” bonds).

📖 Giải thích chi tiết

Thang xếp hạng tín dụng:

Phân loại	S&P/Fitch	Moody’s
Investment Grade	AAA đến BBB−	Aaa đến Baa3
Speculative Grade	BB+ trở xuống	Ba1 trở xuống

• A sai: BBB− vẫn là investment-grade, không phải speculative-grade.
• B đúng: BBB− / Baa3 là ranh giới cuối cùng của investment grade.
• C sai: High-quality với rủi ro tối thiểu mô tả nhóm AAA/AA, không phải BBB−.

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