Default and Rating Changes Correlation

[Anonymous]

Hi I have question regarding the topic of 3 EXAM.
In the book there is such example:
If the probabilities of default for obligors rated A and BB are PDef(A) = 0.0006 and PDef(BB) = 0.0106, respectively, and the correlation coefficient between the rates of return on the two assets is ????= 0.2, then the joint probability of default is only 0.000054.11 Now, using equation (III.B.5.1), we find that the correlation coefficient between the two default events is only 0.019.
So I understand the formula of joint default probability P(A?=Default Correlation of A&B*?((P(A)(1-P(A) ) )(P((1-P( ) ) )+ P(A)P(. But I don’t understand how they got 0.000054.11 using correlation coefficient between the RATES OF RETURN on the two assets, because in this way you can’t use the formula above ( because there is used correlation coefficient between the two DEFAULT EVENTS).
This question just blows my mind.

Regards and Happy New Year

[Author]

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