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What is a factor model? Why are factor models useful when defining a correlation

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Question

Explain the difference between real-world and risk-neutral probabilities. Which is;higher?Why;did mortgage lenders frequently fail to check information in mortgage;applications during the 2000 to 2007 period? Why do we refer to the increase;in house prices between 2000 and 2007 as a ?bubble??Consider the following two events: (a) a bank loses $1 billion from an unexpected lawsuit relating to its transactions with a counterpart and (b) an insurance company loses $1 billion because of an unexpected hurricane in Texas. Suppose that you have same investment in shares of the bank and the insurance company. Which loss are you more concerned about? Why?What;determines the confidence level used by a financial institution in its economic;capital calculations?;="msonormal">="msonormal">

 

Paper#47756 | Written in 18-Jul-2015

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