15-24 One problem with using CRA statistical credit scoring models to evaluate sovereign credit risk is the classification into only two possible outcomes.

Question

Quizplus · Accepted Answer

CRA statistical credit scoring models typically classify sovereign credit risk into two outcomes: default or non-default. However, this oversimplification may not fully capture the nuances and complexities of sovereign credit risk, such as the possibility of partial default, delayed payments, or renegotiated terms. Therefore, solely relying on statistical credit scoring models may be inadequate for evaluating sovereign credit risk.

15-24 One Problem with Using CRA Statistical Credit Scoring Models