Explanation:
The Fundamental Review of the Trading Book (FRTB) recognizes two types of risk for instruments dependent on the credit risk of a particular company. These are:
(Note: The explanation provided in the source text is truncated.)
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Q.2371 Basel II.5 introduced the incremental risk charge (IRC), while the Fundamental Review of Trading Book (FRTB) provides a modification of the IRC by recognizing that for instruments dependent on the credit risk of a particular company, two types of risk can be identified. These are:
A
Downgrade risk and jump-to-default risk
B
Downgrade risk and credit spread risk
C
Credit spread risk and jump-to-default risk
D
Credit spread risk and liquidity risk