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Exam Code: C_SAC_2102
Exam Name: SAP Certified Application Associate - SAP Analytics Cloud
Certification Provider: SAP
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NEW QUESTION: 1
Under the contingent claims approach to measuring credit risk, which of the following factors does NOT affect credit risk:
A. Volatility of the firm's asset values
B. Cash flows of the firm
C. Maturity of the debt
D. Leverage in the capital structure
Under the contingent claims approach, credit risk is modeled as the value of a put option on the value of the firm's assets with a strike equal to the face value of the debt and maturity equal to the maturity of the obligation. The cost of credit risk is determined by the leverage ratio, the volatility of the firm's assets and the maturity of the debt. Cash flows are not a part of the equation. Therefore Choice 'a' is the correct answer.
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