Here with questions again, in Schweser LOS 35.a.,
I’m looking at the table in the first example, where you’re supposed to calculate CVA.
The exposure goes down as time goes on… as does LGD, Expected Loss…
Shouldn’t these things be getting smaller as time goes on?
Thanks
I don’t have access to the table, but you say that they’re going down, then ask, “Shouldn’t they be getting smaller?”
If they go down, they are getting smaller, no?
in year one, exposure is 94
in year two, exposure is 98
in year 3 (the bond reaches maturity), exposure is 100 (aka the value of the bond)
It’s a discount bond.
Pull-to-par.
