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From the Basel II accord: For corporate and bank exposures, the PD is the greater of the one-year PD associated with the internal borrower grade to which that exposure is assigned, or 0.03%. So it is 0.03%


From the information I've gathered the volatility smile concept did not exist prior to 1987. Since then it can be seen in foreign exchange markets and various other investments. Equity derivatives show volatility pairs and the smile tends to seen quite easily here.

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