For the remaining questions, please indicate whether True or False. (Importantly, please include a convincing...
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For the remaining questions, please indicate whether True or False. (Importantly, please include a convincing and targeted explanation of why.) c) If the presumed recovery rate on a credit reference entity (eg a counterparty) goes up (and assuming all other market variables of relevance are unchanged), then the implied default probability goes down. d) Take two counterparties with identical exposure profiles, but they differ in their credit qualities: A has a low credit spread, and B has a very high credit spread. It then follows that a stress test that bumps credit spreads up by 20bp will result in a higher CVA increase (in dollars) for A than for B. e) If the DVA on a portfolio goes up, then the CVA will necessarily go down.
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