The rating agencies and their credit ratings : what they are, how they work and why they are relevant

The rating agencies and their credit ratings : what they are, how they work and why they are relevant / Herwig M. Langohr and Patricia T. Langohr.

Credit rating agencies play a critical role in capital markets, guiding the asset allocation of institutional investors as private capital moves freely around the world in search of the best trade-off between risk and return. However, they have also been strongly criticised for failing to spot the A...

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Bibliographic Details
Main Authors: Langohr, Herwig M. (Author), Langohr, Patricia T. (Author)
Format: eBook
Language:English
Published: Chichester, West Sussex, England ; Hoboken, NJ : Wiley, [2008]
Subjects:
Credit ratings.
Credit bureaus.
BUSINESS & ECONOMICS > Finance.
Credit bureaus
Credit ratings
Online Access:Click for online access
Table of Contents:
  • The Rating Agencies and their Credit Ratings; Contents; Foreword; Preface; 1 Introduction; 1.1 Context and Premises; 1.1.1 The Benchmarking of Default Prospects Remains Deeply Rooted in Business Analysis; 1.1.2 Credit Ratings Play a Unique Role in Overcoming Information Asymmetries on the Information Exchanges; 1.1.3 Under the Spotlight as Unique Infomediaries, the CRAs became Strictly Regulated; 1.2 Book Chapters; 1.3 Supporting Materials; Part A Credit Rating Foundations; 2 Credit Ratings; 2.1 The World of Corporate Defaults; 2.1.1 What are Corporate Defaults?
  • 2.1.2 The Drivers of Corporate Defaults 2.1.3 Recovery Rates from Defaults; 2.2 Credit Rating Scales; 2.2.1 Fundamental Ordinal Credit Rating Scales; 2.2.2 Rating Scales and Observed Bond Market Credit Spreads; 2.2.3 Market-Implied Cardinal Rating Scales and Default Probabilities; 2.3 The Interpretation of Credit Ratings; 2.3.1 Interpreting from the Scale; 2.3.2 Correctly Interpreting versus Misinterpreting Ratings; 2.3.3 Special Issues; 2.4 Credit Ratings: Summary and Conclusions; 3 The Raison d'Etre of Credit Ratings and their Market
  • 3.1 Needs for Credit Ratings
  • or the Demand Side of Ratings 3.1.1 Principals: Issuers/Borrowers; 3.1.2 Principals: Fixed Income Investors; 3.1.3 Prescribers; 3.2 Credit Ratings as a Solution to Information Asymmetry: Economic Analysis; 3.2.1 Economics of Ratings: Intuition; 3.2.2 Economics of Ratings: Analysis; 3.2.3 The E conomic Analysis of Ratings: Summary and Implications; 3 .3 Credit Rating Segments
  • or Scale and Scope of the Rated Universe; 3.3.1 Industry Segments or Type of Rated Issuers; 3.3.2 Product Segments or Types of Rated Issues
  • 3.3.3 Geographical Segments or Location of the Obligor 3.4 Summary; 3.5 Technical Appendix; 4 How to Obtain and Maintain a Credit Rating; 4.1 The Rating Preparation; 4.1.1 The Issuer Client; 4.1.2 The Rating Adviser-Intermediary; 4.1.3 The Credit Rating Agency Supplier; 4.2 The Rating; 4.2.1 The Rating Action; 4.2.2 Rating Follow-Up; 4.2.3 The Rating Agreement; 4.3 Quality of the Rating Process; 4.3.1 Objectivity; 4.3.2 Diligence; 4.3.3 Transparency; Part B Credit Rating Analysis; 5 The France Telecom Credit Rating Cycle: 1995-2004
  • 5.1 From Sovereign Status to Near Speculative Grade (1995-2002)5.1.1 How Sovereign Aaa Status of June 1995 Adjusts to Corporate Aa1 in July 1996; 5.1.2 A Company that went Public on Aa1 Status in October 1997 is Downgraded to Aa2 in December 1999; 5.1.3 Rapid Extension of FT's Reach and Two Notches Downgrade to A1 in September 2000; 5.1.4 A Wake-up Call: the Orange IPO and Surprise Two Notches Downgrade to A3 in February 2001; 5.1.5 The Slide Downward to Baa1 in September 2001; 5.1.6 Looming Crisis and Two Notches Downgrade to Baa3 in June 2002

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