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Comparing the accuracy of default predictions in the rating industry: The case of Moody's vs. S&P

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  • Krämer, Walter
  • Güttler, André

Abstract

We consider 1927 borrowers from 54 countries who had a credit rating by both Moody’s and S&P as of the end of 1998, and their subsequent default history up to the end of 2002. Viewing bond ratings as predicted probabilities of default, we show that it is unlikely that both agencies are well calibrated, and that the ranking of the agencies depends crucially on the way in which probability predictions are compared. --

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Bibliographic Info

Paper provided by Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen in its series Technical Reports with number 2003,23.

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Date of creation: 2003
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Handle: RePEc:zbw:sfb475:200323

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Related research

Keywords: credit rating; probability forecasts; calibration;

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  1. Krämer, Walter, 2002. "On the ordering of probability forecasts," Technical Reports, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen 2002,50, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
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Cited by:
  1. Christophe Godlewski, 2004. "Are Bank Ratings Coherent with Bank Default Probabilities in Emerging Market Economies ?," Finance, EconWPA 0409023, EconWPA.

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