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Suppose that a bank has a total of $100 million of retail exposures. The...

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Finance

Suppose that a bank has a total of $100 million of retail exposures.

The 1-year probability of default averages 2% and the recovery rate

averages 60%.

The copula correlation parameter* is estimated as 0.1. In this case,

the 1-year 99.9% worst case default rate is equal to?

Find the worst case default rate.

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