Credit rating agencies' methodologies, metrics and rating accuracy

‘Credit rating agencies’ methodologies, metrics and rating accuracy’, explains how, within a relatively very short period of time, the financial regulators all over the world have helped main credit agencies to impose their industry as an extremely lucrative oligopoly, without questioning the accuracy of their approaches to risk assessment and wonders if these approaches were not as accurate as pretended. The chapter discusses credit agencies' methodologies of assessing credit default and analyses their level of accuracy. It defines the credit default risk and its analysis and then introduces some default prediction models. The chapter discusses credit agencies' default assessment methodologies; presents agencies' rating metrics and defaults studies; and relates independent assessment of credit ratings accuracy. Default risk assessment has become an important financial activity and several approaches of issuer defaults predictions have been suggested and among the most popular are the cash flow analysis, ratio analysis, default prediction models and agencies' credit rating. Credit rating methodology at Fitch Ratings reflects qualitative and quantitative factors, covering debt issuers' operational and financial risks. The process of rating at standard & poor's (S&P) begins with the assessment of all the resources available to the issuer for facing its financial commitments regarding the volume and the timing of its debt obligations. The chapter discusses credit agencies' methodologies of assessing credit default and analyses their level of accuracy. It defines the credit default risk and its analysis and then introduces some default prediction models. The chapter discusses credit agencies' default assessment methodologies; presents agencies' rating metrics and defaults studies; and relates independent assessment of credit ratings accuracy. Default risk assessment has become an important financial activity and several approaches of issuer defaults predictions have been suggested and among the most popular are the cash flow analysis, ratio analysis, default prediction models and agencies' credit rating. Credit rating methodology at Fitch Ratings reflects qualitative and quantitative factors, covering debt issuers' operational and financial risks. The process of rating at standard & poor's (S&P) begins with the assessment of all the resources available to the issuer for facing its financial commitments regarding the volume and the timing of its debt obligation