The single-factor model is used to examine the impact of varying default correlations based on a credit position's beta. Each individual firm or credit, i, has beta correlation，β， with the market, m. Which of the following statements most accurately describes the implication ofusing a specific value m for the market parameter in the single-factor model?
A. The conditional probability of default will be greater than the unconditional probability of default when .i is equal to zero.
B. The unconditional standard deviation is less than the conditional standard deviation.
C. Individual idiosyncratic shocks，ε， are positively correlated to other firms' shocks.
D. Individual asset returns α， are independent from other firms' shocks and returns.
Answer:D
Important implications of the single-factor model is that individual asset returns α，and idiosyncratic shocks，ε， are independent from other firms' shocks and retums.