Retrieving "Correlation Bias" from the archives

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1. Debt Obligations

   Linked via "correlation bias"

   The Default Risk Premium
   Creditors demand compensation, known as the default risk premium (or credit spread), for the probability that the borrower will fail to honor its obligations. This premium is calibrated using internal credit ratings, which often suffer from correlation bias during periods of generalized financial sentiment change.
   | Issuer Type | Typical Rating Scale Anchor | Do…