The credit rating is the credit risk evaluation of a prospective debtor (individual, business, company or government), predicts their ability to repay debt, and implicit estimates of the likelihood of the defaulted debtor. The credit rating is an evaluation of the credit rating agency of qualitative and quantitative information for the prospective debtor, including information provided by the debtor candidate and other non-public information obtained by the credit rating agency analyst.
Credit reporting (or credit score) - in contrast to credit ratings - is a numerical evaluation of individual creditworthiness, conducted by credit bureaus or consumer credit reporting agencies.
Video Credit rating
Country credit rating
State credit rating is a credit rating of a sovereign entity, such as a national government. The government credit rating shows the level of environmental risk of a country's investment and is used by investors when it wants to invest in certain jurisdictions, and also takes into account political risks.
The "country risk ranking" table shows the top ten most risky countries for investment in January 2018. Further ratings are broken down into components including political risk, economic risk. Euromoney's bi-annual risk index monitors the political and economic stability of 185 sovereign nations. The results focus primarily on the economy, particularly the risk of government default or risk of default for exporters (also known as trade credit risk).
A. M. Best defines "state risk" as the risk that country-specific factors may affect an insurer's ability to meet its financial obligations.
Maps Credit rating
Short-term and long-term rating
Ranking states the possibility that the party rated will go into default within a certain period of time. In general, a period of one year or below is considered short-term, and anything above that is considered long-term. In the past, institutional investors preferred to consider long-term ratings. Currently, short-term ratings are typically used.
Company credit rating
The credit rating can discuss the company's financial instruments, namely debt security such as bonds, but also the company itself. Ratings are awarded by credit rating agencies, the largest are Standards & amp; Poor's, Moody's and Fitch Ratings. They use letter assignments like A, B, C. The higher values ​​are meant to represent a probability lower than the default.
Agencies do not include the number of hard default probabilities to each class, preferring descriptive definitions such as: "the ability of the obligor to fulfill its financial commitments on very strong obligations," or "less prone to non-payment than other speculative problems..." (Standard Definition and Poors of AAA-rated and BB-rated bonds). However, some studies estimate the average risk and rewards of bonds by rating. One study by Moody's claims that during the "five-year time bond" it gives the highest rating (Aaa) to have a "cumulative standard rate" of 0.18%, next highest (Aa2) 0.28%, the next (Baa2) 2, 11%, 8.82% for the next (Ba2), and 31.24% for the lowest studied (B2). (See "Default rate" in "Estimated spreads and default rate by rating ratings" table to the right.) Over a longer period, it states "orders are generally, but not exactly, preserved".
Another study at the Journal of Finance calculated an additional interest rate or "spread" of corporate bonds paying more than US Treasury bonds "without risk", according to bond ratings. (See "Base point spreads" in the table to the right.) Looking at the rated bonds for 1973-89, the authors found the AAA-rated bonds paid 43 "basis points" (or 43/100 percentage points) during US Treasury bonds (thus yielding 3 , 43% if Treasury yields 3.00%). The CCC (or speculative) "rubbish" bond, on the other hand, pays more than 7% (724 basis points) more than the average Treasury bonds during that period.
Different rating agencies may use variations in a combination of lowercase and uppercase alphabets, with plus or minus marks or numbers added to enhance further ratings (see color chart). Standard & amp; Scale of assessment of the poor using capital letters and plus and minus. The Moody rating system uses numbers and lowercase letters and capital letters.
While Moody's, S & amp; P and Fitch Ratings control about 95% of the credit rating business, they are not the only rating agencies. The DBRS long-term ranking scale is somewhat similar to Standard & amp; Poor's and Fitch Ratings with high and low words replace and -. This applies the following, from very good to bad: AAA, AA (high), AA, AA (low), A (high), A, A (low), BBB (high), BBB, BBB (low) (High), B, B (low), CCC (high), CCC, CCC (low), CC (high), CC, CC (low), C (high), C, C (low) and D. Short-term ratings often map long-term ratings even though there is room for exceptions on the high or low side of each equivalent.
S & P; P, Moody's, Fitch, and DBRS are the four rating agencies recognized by the European Central Bank (ECB) to determine the terms of collateral for banks to borrow from the central bank. The ECB uses the first and best rule among four institutions that have established ECAI status, which means that it takes the highest ranking among four institutions - S & P, Moody, Fitch and DBRS - to determine the haircuts and collateral requirements to borrow. Ratings in Europe have been under close scrutiny, especially the highest ratings given to countries such as Spain, Ireland and Italy, as they affect how many banks can borrow against the debts of the countries they hold.
AM The best rates from very good to poor in the following ways: A, A, A, A-, B, B, B, C, C, C, C-, D, E, F, and S. CTRIS systems rating are as follows: CT3A, CT2A, CT1A, CT3B, CT2B, CT1B, CT3C, CT2C and CT1C. All CTRISKS values ​​are mapped to a one-year default probability.
See also
- Country budget by country
- List of countries by credit rating
- List of countries by tax revenue as a percentage of GDP
- List of sovereign nations by public debt
Individual:
- Credit history
- Credit score
References
External links
- Media related to Credit ratings in Wikimedia Commons
Source of the article : Wikipedia
0 Comments