Quotation Eisl, Alexander, Elendner, Hermann, Lingo, Manuel. 2011. Re-Mapping Credit Ratings. Association Française de Finance 2011 Spring Conference, Montpellier, Frankreich, 11.05.-13.05..


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Abstract

Rating agencies report ordinal ratings in discrete classes. We question the market's implicit assumption that agencies define their classes on identical scales. To this end, we develop a non-parametric method to estimate the relation of rating scales for pairs of raters. This scale relation identifies for every rating class of one rater the extent to which it corresponds to any rating class of another, and hence enables a rating-class specific re-mapping of one agency's ratings to another's scale. Our method is based purely on ordinal co-ratings to obviate error-prone estimation of PDs and disputable assumptions involved, and exploits structure in the joint estimation of all rating classes' relations from a pair of raters. We find evidence against the hypothesis of identical scales for the three major rating agencies Fitch, Moody's and Standard & Poor's, provide the relations of their rating classes and illustrate the importance of correcting for scale relations in benchmarking.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Re-Mapping Credit Ratings
Event Association Française de Finance 2011 Spring Conference
Year 2011
Date 11.05.-13.05.
Country France
Location Montpellier
URL http://affi2011.etud.univ-montp1.fr/

Associations

People
Eisl, Alexander (Details)
Elendner, Hermann (Former researcher)
External
Lingo, Manuel (Oesterreichische Nationalbank, Austria)
Organization
Research Institute for Computational Methods FI (Details)
Institute for Financial Research IN (Details)
Institute for Finance, Banking and Insurance IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5300 Economics (Details)
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