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Credit Risk [32]

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Bullet points include: Strengths. Easy to develop very consistent model. Easy to produce model that can be used for both short and long holding periods. Weaknesses. Not obvious how to apply to borrowers without quoted equity, e.g. sovereigns. Cannot be easily integrated with internal ratings or scoring systems. Places heavy reliance on equity valuations, which may be relatively unconnected with credit quality or credit valuations. E.g. potential decline in goodwill in event of default poorly handled

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