As part of measuring unobservable default risk between borrowers, the Moody's Analytics model decomposes asset returns into

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Systematic risk and unsystematic risk are the two components into which asset returns can be decomposed according to the Moody's Analytics model for measuring unobservable default risk. Systematic risk is inherent to the entire market or market segment, while unsystematic risk is specific to a particular company or industry.

As Part of Measuring Unobservable Default Risk Between Borrowers, the Moody's