Financial Risk Manager Part 2
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A junior risk analyst at an investment bank is using a rating migration matrix to calculate the default probability of a corporate bond issuer. The 1-year credit migration matrix is presented below:
| Current rating | Rating in the next period | |||
|---|---|---|---|---|
| A | B | C | Default | |
| A | 90% | 8% | 0% | 2% |
| B | 5% | 76% | 10% | 9% |
| C | 1% | 14% | 69% | 16% |
Which of the following statements is correct?