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A quantitative risk analyst at a bank has been asked to incorporate market liquidity into the bank's VaR model. The analyst examines how changes in the level of market liquidity impact the liquidity horizon and the bank's credit risk exposure. Which of the following statements describes the most likely impact of changes in market liquidity?
A
If market liquidity decreases, the liquidity horizon will shorten, and the credit risk exposure will increase.
B
If market liquidity decreases, the liquidity horizon will lengthen, and the credit risk exposure will increase.
C
If market liquidity increases, the liquidity horizon will shorten, and the credit risk exposure will increase.
D
If market liquidity increases, the liquidity horizon will lengthen, and the credit risk exposure will decrease.