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Business Analyst for Credit Risk

Topics Covered

  • Moving Average Models
  • PD
  • LGD
  • Full Monte Carlo
  • interest rates

Useful for hiring

  • Credit Risk Business Analyst (0-2 years experience)
  • Business Analyst - Risk and P&L (0-2 years experience)
  • Credit Risk Business Analyst - Wrong Way Risks and Settlements (0-2 years experience)

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Question

You are a Business Analyst at BD Bank. You are involved in a software project that is replacing an out-dated, inefficient legacy system (System X) with an efficient, process-driven web-based solution. However, the project team is facing a few challenges.

The project has requested a detailed stakeholder matrix. You have documented the stakeholder matrix in the RACI format. The stakeholder matrix identifies several key stakeholders. 

RACI legend:
Responsible - Those who do the work to achieve the task
Accountable - Signs off various project outputs and ensures thorough completion of each task
Consulted - Required to provide feedback on documents / in workshops
Informed - Kept up to date on progress



Which of the following statements is not correct pertaining to the Business Analyst’s responsibilities as documented in the RACI matrix?

Answer
    • The business analyst will provide input into the development process and support the senior developer
       

    • The business analyst will document the Functional Requirement specification in accordance with the project governance principles
       

    • The business analyst will analyze the documented process and provide feedback to the stakeholders
       

    • The business analyst will send project progress communications to project stakeholders
       

Question

Consider PD as probability of default, LGD as the loss given default and EAD as exposure at default. At a portfolio level, expected credit losses are driven by which of them?

Answer
    • PD only

    • expected LGD only

    • PD and expected LGD only

    • None of the mentioned

Question

Consider a bank invests in a 1-year loan with a CCC credits. Also, the default probability is 24.27%. Assume that, using annual compounding (pay attention to compounding), the risk free 1 year spot rate is 6% and the recovery rate is 40%. What should be the minimum yield spread?

Answer
    • 10%

    • 15%

    • 24%

    • 40%

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