Expected loss, calculation

Step 5 Rate and Price Tranches. Evaluate the probability-weighted losses in each scenario to generate an overall expected loss for each tranche, and from this expected loss calculate an implied rating for the tranche. Price the tranche based on spreads for comparably rated investments. Having determined the cost of each ratable liability tranche, estimate the available excess spread applicable to the (unrated) equity tranche. 

Traditionally, insurance is the main mechanisms available to individuals and business to manage the financial consequences of risky events, such as natural hazards like windstorms and floods. Insurance companies used to work making each individual or business pay a premium to protect themselves against an uncertain loss. The premium is calculated by pooling risks across a large and diverse population considering the pool s expected losses. 

Steady state acoustic response of the unit cell occurred for the composites considered after the passage of some five acoustic oscillations. Patterns of direct stress, and shear stress as shown in Figures 2 and 3 were obtained. As expected, the corners of the cavities concentrated the stresses. Viscoelastic energy loss calculations, not discussed here, also show that the corners of the cavities are concentrations of energy losses. 

The results of a study of Dialock/CLS have been reported in 70 patients (29 men, 41 women mean age at implantation 63 (range 30-88) years), of whom 42 had no infection (45 when infections occurring within 30 days after implantation were omitted) (4). Excluding these early events, 25 patients had a total of 30 infections. The majority (22 events in 20 patients) were pocket infections. The first seven of these pocket infections caused loss of the Dialock. After local treatment with gentamicin no further devices were lost through pocket infection. No infections were recorded during the last 3 months, although the expected rate calculated on the basis of... 

Now, given a suitable prior distribution (which does not have to be the same as the regulator s), the sponsor can calculate the predictive distribution for the test statistic and hence the expected loss for any given sample size, including the cost of experimentation. The optimal sample size is then the one with the smallest expected loss. This is a double optimization procedure the optimal decision (minimum loss) for a given value of the test statistic and sample size must be determined and then the sample size which yields the smallest minimum loss is chosen (Bindley, 1997). 

The expected loss severity for each loan can then be calculated by taking into account the LTV of the loan, market value decline on the property. 

Having calculated the expected loss to each tranche, we can return to the Idealized Cumulative Default table to generate a rating for them. In our hypothetical portfolio, we find implied ratings of Aa3 for the second loss tranche because of its expected loss of 0.039%, and Aaa for the third loss tranche, where the probability of loss is negligible. The most... 

Note holders expected losses are determined by considering the impact on their cash flows of the credit losses—losses from loan defaults— occurring in various scenarios, taking into account how such losses are allocated to the issue s tranches. The cash flows to the note holders depend on whether a default has occurred and the size of the resulting loss. The severity of the loss equals the par value of the note less the recovery rate. The probability of default may be inferred from the rating of the underlying credit exposures. Expected losses are calculated using Monte Carlo techniques, which simulate thousands of scenarios and cash flows and so require sophisticated computational models. 

The Bayes classifier minimizes the total expected loss. The minimum expected risk of a Bayes classification can be calculated if all... 

For advanced modeling purposes, the addition of minor loss, flow field switchback, and manifolding effects can be approached analytically. In practice, however, the actual pressure drop in an cell or stack is very difficult to predict with high precision due to the effects of entry length, local turbulence, additional minor losses from switchback, consumption, uptake and other effects. Additionally, in PEFCs and AFCs with a porous diffusion media, there can be unintentional convective flow under the channels, which reduces overall pressure drop, as discussed in Chapter 6. Therefore, a good starting point is to assume the frictional pressure drop dominates (which has been found to be true in certain PFFCs [32]) and calculate an expected loss from Fq. (5.76). For a particular fuel cell, the pressure drop can be correlated as a function of entrance velocity, since this is relatively easy experimental data to obtain. 

Aluminum-containing propellants deflver less than the calculated impulse because of two-phase flow losses in the nozzle caused by aluminum oxide particles. Combustion of the aluminum must occur in the residence time in the chamber to meet impulse expectations. As the residence time increases, the unbumed metal decreases, and the specific impulse increases. The soHd reaction products also show a velocity lag during nozzle expansion, and may fail to attain thermal equiUbrium with the gas exhaust. An overall efficiency loss of 5 to 8% from theoretical may result from these phenomena. However, these losses are more than offset by the increase in energy produced by metal oxidation (85—87). 

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