Conditional default probabilities modeled under CreditPortfolio view use a:
A.
Power function
B.
Altman's z-score
C.
Probit function
D.
Logit function
The Answer Is:
D
This question includes an explanation.
Explanation:
Conditional default probabilitiesare modeled as a logit function under CreditPortfolio view. That ensures the resulting probabilities are 'well behaved', ie take a value between 0 and 1. The probability may be expressed as = 1/ (1 + exp(I)), where I is a country specific index taking various macro economic factors into account.
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