NO.PZ202304070100009105
问题如下：
Ibarra is interested in analyzing how a simultaneous decrease in the recovery rate and the probability of default would affect the fair value of bond B2. She decreases both the recovery rate and the probability of default by 25% of their existing estimates and recomputes the bond’s fair value. The recomputed fair value is closest to:
选项：
A.€1,096.59.
€1,108.40.
€1,111.91.
解释：
Correct Answer: B
The recovery rate to be used now in the computation of fair value is 30% × 0.75 = 22.500%, whereas the hazard rate to be used is 1.50% × 0.75 = 1.125%.
The tree that shows the valuation assuming no default of bond B2 in the solution to Question (3) will not be affected by the foregoing changes. Accordingly, VND remains €1,144.63.
Following the steps outlined in the solution to Question (3), the following table is prepared, which shows that the CVA for the bond decreases to €36.23. Thus, Ibarra concludes that a decrease in the probability of default has a greater effect on fair value than a similar decrease in the recovery rate. The steps taken to complete the table are the same as those in Question (3). There are no changes in exposures or discount factors in this table.
Fair value of the bond considering CVA = €1,144.63 – CVA = €1,144.63 – €36.23 = €1,108.40
