What will be the amount of capital you should keep to maintain the AA credit rating (probability of default 0.03%) in terms of value at risk (VaR)?

Use: 99% confidence level

ANSWER

The amount of capital you should keep to maintain the ratings is = 3 standard deviation

3 standard deviation = 0.03% of default

suppose a company has 1,000,000 capital and standard deviation is 5%

so the capital requirement = 1,000,000 x (0.05)³

= 125

therefore on a capital of 1 million 125 is required similarly it can be calculated for any amount