Comparing the accuracy of default predictions in the rating industry

The case of Moody’s vs. S&P

Fachartikel 123

Fachbereich
Statistik/Ökonometrie
Fachrichtung
Statistik
Artikel
2005
Sprache
englisch
Co Autoren
André Güttler

Beschreibung

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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