General Studies · Credit Risk Management
In the context of credit risk management, 'Migration Risk' is best defined as:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The possibility that a counterparty will default on its financial obligations before the maturity date.
- 2The risk that a borrower's credit quality will deteriorate, leading to a downgrade in their internal or external credit rating.✓
- 3The uncertainty regarding the total amount of exposure at the time of a borrower's default.
- 4The risk of loss due to fluctuations in the market price of the collateral held against a loan.
Correct answer
The risk that a borrower's credit quality will deteriorate, leading to a downgrade in their internal or external credit rating.
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