Any model that seeks to estimate an efficient frontier for loans, and thus the optimal proportions in which to hold loans made to different borrowers, needs to determine and measure the

Question

Quizplus · Accepted Answer

All of the mentioned factors need to be taken into account when estimating an efficient frontier for loans and determining optimal proportions. The expected return on each loan and the risk of each loan are important for assessing the potential profitability and potential losses on the loans. The correlation of default risks between loans is important for understanding how different loans may impact each other in a portfolio. Finally, the expected return of the entire loan portfolio is important for optimizing the overall portfolio and making informed decisions about how to allocate resources. Therefore, all of these factors must be considered when estimating an efficient frontier for loans.

Any Model That Seeks to Estimate an Efficient Frontier for Loans