For a high-quality debt issuer with a large amount of publicly traded debt, bond
investors tend to devote most effort to assessing the issuer’s:
A default risk.
B loss severity.
C market liquidity risk.
Fixed Income
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Ans will be A
Because since its a high quality debt issuer it will not have liquidity risk so option c is gone
So how do we calculate loss severity
Formula is 1- probability of default
So first we check what is the probability that the company can default then on the basis of that we decide how severe the loss can be
So analyst focus on default risk of the company
Option C will be eliminated not because it’s a high quality bond but because it is given that there is a large amount of publicly traded debt.
Yes I meant that high quality issuer hai and its large publicly traded
But thanks for adding to it
loss severity is 1-recovery rate not 1- probab of default
Yaa ..thank you for correcting
loss severity is 1-recovery rate not 1- probab of default