Ratings, Certifications and Grades: Dynamic Signaling and Market Breakdown
نویسندگان
چکیده
منابع مشابه
Ratings, certifications and grades: dynamic signaling and market breakdown
We consider the effect a public revelation of information (e.g. rating, grade) has on signaling and trading in a dynamic model. Competing buyers offer prices to a privately informed seller who can reject these offers and delay trade. This delay is costly and the seller has no commitment to the duration of the delay. We show how the external public information allows for signaling in equilibrium...
متن کاملDynamic signaling and market breakdown
We consider the effects a public revelation of information (e.g. rating, grade) has on trading in a dynamic signaling model. Competing buyers offer prices to a privately informed seller who can reject them and delay trade. Delay is costly and the seller has no commitment to its duration. The external public information allows for signaling in equilibrium. More interestingly, we characterize the...
متن کاملMarket signaling with grades
We consider a market signaling model in which receivers observe both the sender’s costly signal as well as a stochastic grade that is correlated with the sender’s type. In equilibrium, the sender resolves the trade-off between using the costly signal versus relying on the noisy grade to distinguish himself. When grades are sufficiently informative, separating equilibria do not survive common re...
متن کاملSupplement to “Market Signaling with Grades”
C Supplementary Appendix: More than Two Types Let us expand the type space to be {1, ..., N}, N > 2. The receivers’ prior, μ0, is a probability distribution with full support over the type space. When describing beliefs (be they prior, interim or final) we use superscripts to denote the probability assigned to the various types (e.g., μ0 is the probability the prior assigns to type t). We now a...
متن کاملCredit Ratings and Market Dynamics
Rating agencies provide opinions on the creditworthiness of companies and debt instruments, and so reduce lenders’ information gathering costs. Their ratings are especially useful in distinguishing the relative riskiness of different borrowers. Empirical evidence suggests that rating agencies rank the riskiness of borrowers well: realised default rates are consistently higher for lower rating g...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2003
ISSN: 1556-5068
DOI: 10.2139/ssrn.441004