SOA QFI QFQuantitative Finance & Investment — Quantitative Finance

Fellowship (FSA)

5 hours·≈10–12 written-answer questions with derivations·≈450 study hours

Score 0/0 · 4 MC

QFI QF · Q1
Multiple choice
Credit risk & structured products
A 5-year CDS on a name with flat hazard rate 2% and recovery 40% has an approximate fair spread of:
QFI QF · Q2
Written answer
Credit risk & structured products
Explain the Merton structural model of default and compute the distance to default for a firm with asset value 120, debt face 100 due in one year, asset drift 6% and asset volatility 25%. Discuss two limitations of the model.