Which of the Following Is True of Creditmetrics When It

question 13

Multiple Choice

Which of the following is true of Creditmetrics when it is used to calculate credit VaR

• A) Creditmetrics takes defaults but not downgrades into account
• B) Creditmetrics takes downgrades but not defaults into account
• C) Creditmetrics considers neither defaults nor downgrades
• D) Creditmetrics considers both defaults and downgrades

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Definitions:

Repossess

The process by which a lender takes back property from the borrower due to failure in making the agreed payments.

Suretyship Provision

A clause in a contract that involves a third party (surety) who agrees to fulfill the obligations of the debtor if the debtor fails to do so.

Statute of Frauds

A legal principle that requires certain types of contracts, such as those involving real estate or lasting over a year, to be in writing to be enforceable.

Separately Negotiated

Terms, conditions, or agreements that have been individually discussed and agreed upon by the parties involved, rather than applied universally or as part of a standard procedure.