An analyst at a financial institution has been asked to assess the quality of estimating credit VaR (CVaR) of a homogeneous portfolio of firms (credits) using the single-factor model, under which default correlation varies with the firm's beta to the market factor. The analyst examines the portfolio under the following assumptions:

• There are 1,000 firms (credits) in the portfolio.

• Each firm represents 0.1% of the portfolio.

• There is no idiosyncratic risk.

• Loss given default is the same for each firm in the portfolio.

Based on the information provided, which of the following observations, if made by the analyst, would be correct regarding the application of the single-factor model and its parameters?