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Binomial Trees
A binomial model is a model that assumes that interest rates can take only one of two possible values in the next period
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What is Technology Risk?
Technology can be used to mitigate operational risks. Automated procedures are generally less prone to error than man...
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How to Calculate Discount Factor?
Discount factors is the value that allow us to relate a cash flow received in the future to its value today.
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What are Credit Ratings?
A credit Rating is a quantified assessment of the creditworthiness of a borrower in general terms or with respect to ...
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Volatility Smiles
Volatility smiles are implied volatility patterns generated when option traders allow implied volatility to depend on...
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What is a Subprime Mortgage?
A subprime mortgage is a loan secured by real estate and issued to a credit-worthy borrower.Subprime borrowers have a...
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Migration Risk
Migration risk is the risk that the credit quality of a debtor decreases following the lowering of credit ratings.
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Bond Valuation
Bond Valuation is the amount of money that investors are willing to pay for the stability and guaranteed interest tha...
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Exposure, Loss Given & Probability Defaults
After the financial crisis, international laws were added to reduce the Exposure at Default, Loss Given Default and P...