easy · Frm Part 2 Credit Risk
If a bank utilizes a 'Through-the-Cycle' (TTC) approach, what will likely be observed in the realized default rates of a specific rating grade during a recession?
- The realized default rates will rise significantly above the long-term average for that grade.
- The realized default rates will become zero as obligors migrate to safer grades.
- The realized default rates will decrease because of government intervention.
- The realized default rates will stay perfectly constant at the calibrated PD.
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