Credit Risk Measurement for Bonds

XYZ Corporation is a medium-sized firm that issues bonds to finance its operations. Investors often assess credit risk when evaluating these bonds. One important measure of credit risk is the probability of default (PD), which indicates the likelihood that the issuer will fail to make principal and interest payments.

The bonds issued by XYZ Corporation have a credit rating of BBB, which suggests a moderate level of credit risk. As a financial analyst, you need to understand which metric best represents the risk associated with these bonds.