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        USING PARJAN RECURSION

1.24 A diversified portfolio of bonds consists of investment-grade and noninvestment-grade bonds. The number of defaults of investment- grade bonds in each month is Poisson distributed with parameter 0.2 and the number of defaults of noninvestment-grade bonds in each month is independently Poisson distributed with parameter 1. When there is a default, whether it is an investment-grade or noninvestment- grade bond, the loss is $1 million or $2 million with equal probability. Derive the recursive formula for calculating the distribution of the losses of the portfolio in a month.

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Poirson distsi bution; Panje Recursion: no. of defauetment grode bonds eot efaults 이, investment ỉn each month, 0.2 of defaulks of non InvestmenT grade bonds, potemete I milon or 4 2 th egual Probabilir million ω equa s Co) 0.3012

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