Which of the following attributes are typical for early models of statistical credit analysis?

Which of the following attributes are typical for early models of statistical credit analysis?
A . These models assumed the default of any obligor was independent of the default of any other.
B . The underlying default assumptions were analytically inconvenient.
C . The underlying default assumptions failed to develop relatively simple formulas for the determination of portfolio credit risk.
D . These models effectively incorporated herd behavior.

View Answer

Answer: A

Explanation:

Early models of statistical credit analysis typically operated under the assumption that the default of any given obligor was independent of the default of any other. This simplification made the models more tractable but less realistic, as it did not account for potential correlations between defaults (e.g., economic downturns affecting multiple obligors simultaneously).