Consider two portfolios. One with USD 100 million credit exposure to a single B-rated counterparty. The second with USD 100 million on credit exposure split evenly between 50 B-rated counterparties. Assume that default probabilities and recovery rates are the same for a11 B-rated counterparties. Which ofthe following is correct?
　　A. The expected loss ofthe first portfolio is greater than the expected loss ofthe second portfolio AND the unexpected loss ofthe first portfolio is greater thanthe unexpected loss ofthe second portfolio.
　　B. The expected loss of the first portfolio is greater than the expected loss of the second portfolio AND the unexpected loss ofthe first portfolio is equal to the unexpected loss of the second portfolio.
　　C. The expected loss of the first portfolio is equal to the expected loss of the second portfolio AND the unexpected loss ofthe first portfolio is equal to the unexpected loss ofthe second portfolio.
　　D. The expected loss of the first portfolio is equal to the expected loss of the second portfolio AND the unexpected loss ofthe first portfolio is greater than the unexpected loss of the second portfolio.
　　Answer:D
　　Unexpected loss is the volatility of the expected loss. There's diversification effect in unexpected loss.