Which of the following methods measure loan concentration risk by tracking credit ratings of firms in particular sectors or ratings class for unusual downgrades?

Question

Quizplus · Accepted Answer

Migration analysis tracks credit ratings of firms in particular sectors or rating classes for unusual downgrades, making it the best method to measure loan concentration risk. The other options are not specific to measuring loan concentration risk through credit ratings. Concentration limits and loan volume-based models consider the overall exposure to a single borrower or industry, while loan loss ratio-based models analyze the historical loss experience for a portfolio of loans. Moody's Analytics portfolio manager model is a tool for financial institutions to manage their portfolios, but not specifically for measuring loan concentration risk through credit ratings.

Which of the Following Methods Measure Loan Concentration Risk by Tracking