Deriving Consensus Ratings of the Big Three Rating Agencies

Publication: Working/Discussion PaperWU Working Paper

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Abstract

This paper introduces a model framework for dynamic credit rating processes. Our framework aggregates ordinal rating information stemming from a variety of rating sources. The dynamic of the consensus rating captures systematic as well as idiosyncratic changes. In addition, our framework allows to validate the different rating sources by analyzing the mean/variance structure of the rating errors. In an empirical study for the iTraxx Europe companies rated by the big three external rating agencies we use Bayesian techniques to estimate the consensus ratings for these companies. The advantages are illustrated by comparing our dynamic rating model to a benchmark model.
Original languageEnglish
Publication statusPublished - 1 Dec 2010

Publication series

NameResearch Report Series / Department of Statistics and Mathematics
No.99

Bibliographical note

Earlier version

WU Working Paper Series

  • Research Report Series / Department of Statistics and Mathematics

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