Empirically, Recessions Witness a Rise in Default Rates

question 7

Multiple Choice

Empirically, recessions witness a rise in default rates. Which of the following scenarios also accompanies the rise in default rates?

• A) Recovery rates rise.
• B) Loss given default (LGD) falls
• C) LGD rises
• D) LGD becomes highly volatile.

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Definitions:

Hyperconsciousness

An intensified state of awareness in which one is overly aware of one's thoughts, emotions, and surroundings, often leading to heightened sensitivity or anxiety.

Circadian Rhythms

Physical, mental, and behavioral changes that follow a daily cycle, primarily responding to light and darkness in an organism's environment.

Suprachiasmatic Nucleus

A small region in the brain’s hypothalamus responsible for controlling circadian rhythms, which are the body's internal biological clock.

Pineal Gland

A small endocrine gland in the brain that produces melatonin, a hormone that regulates sleep-wake cycles.