Which of the following statements is true?
A)The risk of a loan reflects the volatility of the loan's default rate around its expected value times the amount lost given default.
B)The product of the volatility of the default rate and the loss give default (LGD) is called the 'unexpected loss'.
C)The product of the volatility of the default rate and the loss give default (LGD) is a measure of the loan's risk.
D)All of the listed options are correct.

Question

Quizplus · Accepted Answer

All the statements accurately describe aspects of loan risk, particularly focusing on the concept of unexpected loss, which is indeed a product of the volatility of the default rate and the loss given default (LGD), and is a measure of the loan's risk.

Which of the Following Statements Is True