Basel III Credit Rating Systems pp 155–181 Cite as
Expert Judgment-based Rating Assignment Process
- Luisa Izzi ,
- Gianluca Oricchio &
- Laura Vitale
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Part of the Palgrave Macmillan Finance and Capital Markets Series book series (FCMS)
Broadly speaking, a rating is an assessment, for a given time horizon, of an obligor’s ability to honor its contractual obligations. External agency ratings, as well as banks’ judgmental rating grades, are usually ordinal measures of credit risk (as opposed to, for example, KMV Moody’s ‘expected default frequencies’ — EDFs), which have been determined by taking into account all relevant available information (both quantitative and qualitative). The ordinality allows for the ranking of obligors in terms of relative riskiness. To quantify obligors’ credit risk, probabilities of default are estimated for each rating category; the riskier a rating category is, the higher its PD estimate should be.
- Credit Risk
- Parent Company
- Negative Support
- Legal Entity
- Dividend Payout
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© 2012 Luisa Izzi, Gianluca Oricchio and Laura Vitale
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Izzi, L., Oricchio, G., Vitale, L. (2012). Expert Judgment-based Rating Assignment Process. In: Basel III Credit Rating Systems. Palgrave Macmillan Finance and Capital Markets Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230361188_8
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1 Procedure Owner: Credit Policy Group This document describes the general steps in the process leading up to, and following, the assignment of a Credit Rating. Moody’s Investors Service (“MIS”) assigns Credit Ratings through a process that involves a number of steps. These steps include:
This guide: Helps explain what credit ratings are and are not, who uses them and how they may be useful to the capital markets. Provides an overview of different business models and methodologies used by different ratings agencies.
Assignment of Interactive Ratings ... The foundation of AM Best’s Credit Rating process is an ongoing dialogue with the rated company’s management, which is ...
In this chapter, we shall analyze judgment-based rating and PD estimation through a detailed description of the entire rating process, moving from calculating a stand-alone rating (combining both quantitative and qualitative criteria) to determining possible rating adjustments, to take into account support provided by other legal entities.