Knowledge Base
Assess the risk of partial or total loss in case of issuer default
Which ratio limits the holding of a single issuer's debt to 10%?
Article 411-82 of the AMF General Regulation imposes this limit to prevent excessive risk concentration.
Which category of issuers presents low to moderate risk according to rating agencies?
Investment-grade issuers, rated from AAA to BBB- by S&P/Fitch or from Aaa to Baa3 by Moody's, are considered to have low to moderate risk.
What is the maximum exposure limit for a sovereign issuer guaranteed by the European Union?
The regulatory framework allows exposure of up to 35% for these issuers, potentially rising to 100% under certain diversification conditions.
The average historical default rate for speculative-grade issuers is approximately 4% per year.
The text explicitly states that speculative-grade (high yield) issuers have an average historical default rate of approximately 4% per year.
Categorize items by dragging them to the appropriate zones
Items to categorize:
Low to moderate risk
High risk
Issuers are classified into investment grade and speculative categories based on their rating. The former have low to moderate risk, while the latter carry high risk.
Credit Default Swaps (CDS)
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CDS are financial instruments used to buy or sell protection against the default risk of an issuer. They can be single-name or index-based, such as the European iTraxx or the American CDX.
A presumption of significant influence exists when the holding exceeds 20% of voting rights.
The text specifies that this presumption applies once the holding exceeds this threshold, in accordance with the regulatory framework.
According to Article 321-80 of the AMF General Regulation, what is the main requirement for credit risk assessment for UCITS?
Article 321-80 stipulates that the portfolio management company may not rely exclusively or mechanistically on credit ratings issued by rating agencies. It must develop an internal assessment methodology, documented in the risk management policy.