Under the Basel II Internal Rating Based (IRB) approach banks should accurately discriminate among different grades of obligors in their credit portfolios taking into account not only the obligor-specific characteristics but also their sector and macro-economic environment. The final objective is the assignment of a credit rating to each of their exposures based upon a set of estimated probabil...

Using 5-year credit default swap (CDS) contracts on 1,247 U.S. firms from 2003 2011, we show a 3-month formation and 1-month holding period CDS momentum strategy yields 52 bps per month. By incorporating past CDS return signals, we further show traditional stock momentum strategies avoid abrupt losses during the crisis period and improve their performance by net 104 bps per month. Both within C...

Recommended by Mark Bebbington We show how it is possible to construct efficient duration dependent semi-Markov reliability models by considering recurrence time processes. We define generalized reliability indexes and we show how it is possible to compute them. Finally, we describe a possible application in the study of credit rating dynamics by considering the credit rating migration as a rel...

Most market observers attribute the recent credit crunch to a confluence of factors: excess leverage, opacity, improperly estimated correlation between bundled assets, lax screening by mortgage originators, and market-distorting regulations. It was the job of the credit rating agencies to create transparency, to provide the basis for risk-management regulation, and to discipline mortgage lender...

Small and medium-sized logistics companies are playing an increasingly important part in social life. We selected the data of small and medium-sized logistical companies in Beijing, Shanghai and Guangzhou, reformulated ordinal regression support vector machine method so that different input points could make different contributions to decide hyper plane, to analyze multi-classification of credi...

This paper examines the quality of credit ratings issued by the three major credit rating agencies Moody’s, Standard and Poor’s and Fitch. If credit ratings are informative, then prices of underlying credit instruments such as fixed-income securities and credit default insurance should change to reflect the new credit risk information. Using data on 246 different major fixed-income securities i...

Kernel classifiers (such as support vector machines) have been successfully applied in numerous areas, and have demonstrated excellent performance. However, due to the high dimensionality and nonlinear distribution of financial input data in credit rating forecasting, finding a suitable low dimensional subspace by nonlinear dimensionality reductions is a key step to improve classifier performan...

Corporate credit rating prediction using statistical and artificial intelligence (AI) techniques has been one of the attractive research topics in the literature. In recent years, multiclass classification models such as artificial neural network (ANN) or multiclass support vector machine (MSVM) have become a very appealing machine learning approaches due to their good performance. However, mos...