A bank computes the distribution of its loan portfolio marked-to-market value

A bank computes the distribution of its loan portfolio marked-to-market value one year from now using the Credit Metrics approach of computing values for
rating transition outcomes using (1) a rating agency transition matrix(2) current forward curves and (3) correlations among rating transition outcomes
derived from stock returns of the obligors. In computing firm-wide risk using this distribution of its loan portfolio the bank is most likely to
understate its risk because it ignores

A. The term structure of interest rates

B. Rating drift

C. Spread risk

D. The negative correlation between the Treasury rates and credit spreads