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CFA Level 2
Fixed Income

Characteristics of Reduced Form Models in Credit Analysis

Very Easy Credit Analysis And Valuation Reduced Form Models

In credit analysis, reduced form models are utilized to assess default risk in bonds and other fixed income securities. These models are distinct from structural models, as they simplify the process by focusing on observable market variables rather than the underlying firm's capital structure.

Which of the following statements accurately describes a characteristic of reduced form models?

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