Credit Ratings and Credit Risk

Credit Ratings and Credit Risk: Is One Measure Enough?

This paper investigates the information in corporate credit ratings from a positive and normative perspective. If ratings are to be informative indicators of credit risk they must reflect what a risk-averse investor cares about: both raw default probability and systematic risk. We find that ratings are inaccurate measures of raw default probability they are dominated as predictors of failure by...

Credit Ratings and Firm Litigation Risk

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Ratings-Based Models of Credit Risk

The Credit Ratings Game

The collapse of so many AAA-rated structured ...nance products in 2007-2008 has brought renewed attention to the causes of ratings failures and the con‡icts of interest in the Credit Ratings Industry. We provide a model of competition among Credit Ratings Agencies (CRAs) in which there are three possible sources of con‡icts: 1) the CRA con‡ict of interest of understating credit risk to attract ...

Market - based Credit Ratings ∗

We present a methodology for rating the creditworthiness of public companies in the U.S. from the prices of traded assets. Our approach uses asset pricing data to impute a term structure of risk neutral survival functions or default probabilities. Firms are then clustered into ratings categories based on their survival functions using a functional clustering algorithm. This allows all public fi...