Ratings can still sharpen credit risk picture
Study shows even the most modern default models benefit from adding credit rating information
The shortcomings of credit ratings are well known. Like the fuzzy screen of an old TV set, they give an impression of what’s going on, but lack reliability. Now, new research suggests that combining ratings with public financial information can get you a much clearer picture.
Credit ratings are clearly imperfect. The 2008 crisis notoriously revealed their vulnerability to commercial influence, and recent research highlighted their tendency to be ‘sticky’ just above the point of a downgrade to
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