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Credit Risk [23]

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Bullet points include: Strengths. Ratings specifically designed to reflect credit quality. Data on ratings agency ratings available over several decades. Can also base modelling on internal ratings or scoring systems for wide set of exposures. Weaknesses. Assumption of constant spreads. No consistency built in between transition matrices and prices at horizon. Not obvious how to set correlations. Dependent on reliability (and time stationarity) of ratings

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