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NEW QUESTION: 1
Under the actuarial (or CreditRisk+) based modeling of defaults, what is the probability of 4 defaults in a retail portfolio where the number of expected defaults is 2?
A. 9%
B. 18%
C. 4%
D. 2%
Answer: A
Explanation:
Explanation
The actuarial or CreditRisk+ model considers default as an 'end of game' event modeled by a Poisson distribution. The annual number of defaults is a stochastic variable with a mean of and standard deviation equal to .
The probability of n defaults is given by (