Question

Which of the following statements regarding Probability of Default (P

  • D is correct based on the credit risk framework?
A It measures the fraction of exposure that the bank loses after liquidating collateral.
B It represents the statistical likelihood that a borrower will default within a given time horizon (typically 1 year).
C It is derived exclusively from the Credit Conversion Factor (CCF) applied to undrawn limits.
D For corporate exposures, it is derived from retail scorecard models, whereas for retail, it comes from rating agencies.
E It is calculated as (1 - Recovery Rate)
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