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
D
By working from the credit transition matrix Creditmetrics takes both downgrades and defaults into account.
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