Contents

1. Payoff Matrix (page 58)

2. Expected Value--Insurance Decision (page 59)

Assume a $100,000 asset and a 1% probability of loss. Assume also that the cost of insurance will be 150% of the average loss.

3. Pascal’s Wager (page 61)

4. Minimax Regret Strategy (page 64)

5. Risk Characteristics as determinants of tool (page 67)

6. Rate Making—basic concepts (page 89)

7. Rate Making—basic concepts (pages 90-92)

8. What is John’s human life value? (page 114)

8. Mortality Table (pages 152-154)

9. Calculating Survival Probabilities (page 158)

10. US CSO Table for female lives, out of an initial 100 million females (page 160-168)

11. Fixed-term Annuities (page 178)

12. Fixed-term Annuities with escalation (page 180)

13. Lifetime Annuities with Escalation

14. Expected Loss—page 209

15. Probability of Default Table at page 211.

16. Page 214 – A $10 million loan with a credit rating of “BB” by S&P. The loan is collateralised with real estate. The probability of default derived from the credit rating is 0.72%. The loss in the event of a default has happened for a similar loan is estimated at 60%. What is the expected credit loss?

17. Basel 1 (1988)

18. Credit Equivalent Amount (Page 304)

19. A bank has entered into a $100 million interest rate swap with a remaining life of four years with an OECD bank. The current value of the swap is $2 million. Calculate the credit equivalent amount (c) and risk weighted assets (RWA) swap with an OECD bank.

20. Calculation of risk weighted assets (RWA) based on Basel 2 Standardized Approach

The assets of a bank consist of $100 million of loans to corporations rated A, $10 million of government bonds rated AAA, and $50 million of residential mortgages*. See page 311 for credit ratings.

Total Number of Words: 1,572 (5 pages)