The correct answer is C.

Wrong-way risk is defined as the risk that occurs when exposure to a counterparty is adversely correlated with the credit quality of that counterparty. In other words, as the exposure to the counterparty increases, the creditworthiness of that counterparty decreases, which heightens the risk of default precisely when the potential loss would be the greatest.

• Concentration risk (Option A) refers to the risk of loss stemming from heavily concentrated exposure to a single counterparty, sector, or region.
• Settlement risk (Option B) is the risk that one party will fail to deliver the terms of a contract with another party at the time of settlement.
• Credit migration risk (Option D) relates to the risk that a borrower's credit rating will be downgraded over time, resulting in a potential decrease in the value of their debt.