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QUESTION 3B. CREDIT RISK AND LOAN PRICING (6 MARKS) Portfolio credit risk can be estimated via the modern portfolio theory framework, as illustrated in the

QUESTION 3B. CREDIT RISK AND LOAN PRICING (6 MARKS)

Portfolio credit risk can be estimated via the modern portfolio theory framework, as illustrated in the diagram below. How do you interpret points A, B and C in this diagram in relation to credit risk management?

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