Hi guys,
I’m going through EOCs on the new Credit Analysis Models chapter. Calculating the CVA and fair value of a bond is blowing my mind a little.
Has anyone got any useful tips they can share for calculating the value of CVA to deduct from the calculated price? LGD and POD calcs are relatively new to me. The first couple of EOC questions need a lot of calculations so I’m wondering if they’ll even test this, but given its a new reading I don’t want to take the chance.
Thanks all!
Hey mate, my feeling is that we are unlikely to be tested to the level of detail (in terms of calculations) that is required in the EOC questions for that reading. I needed to use spreadsheets to do those ones as it just wasn’t feasible any other way. I would say more likely we’ll be given a largely pre-populated table, possibly then need to fill in a couple of things (e.g. PVEL to calculate CVA) and from there it’s more about how to interpret the information - riskless to risky bond price adjustments etc.
Obviously just me two cents, but hopefully that helps calm the nerves a little.