This question was provided as part of my practice questions when revising for 'Professional Risk Management' PRM exam.

If it helps the answer they have given as the correct one is 1.8 million as the estimated expected loss, I just don't know how to arrive at this answer from the information given.

@DimitriVulis Thats all the information I was given. I assumed just for the question it means $100 million worth asset or an asset of 100 million dollar for example. It does say a 0% recovery rate for the contract counterparty.

Thank you, I wasn't sure if there is a non-excel function or not for this but this answer gives the correct value, thanks for your help!

Thank you Alex, I have noted the equation used for next time!

Thank you so much for this explanation. I noticed you mentioned 'in the absence of arbitrage', how would this effect the value?