Abstract

http://ssrn.com/abstract=1909091
 
 

References (42)



 


 



Credit Ratings across Asset Classes: A Long-Term Perspective


Jess Cornaggia


Georgetown University

Kimberly Rodgers Cornaggia


American University - Kogod School of Business

John Hund


Rice University - Jesse H. Jones School of Management

August 3, 2015


Abstract:     
In response to defaults among highly-rated structured finance products, regulators aim to standardize ratings across security types. We explore the economic challenges to this goal. Our contribution to the literature is a comprehensive examination of ratings quality across asset classes over a 30-year period. The divergent ratings behavior during the crisis was extreme, but not an isolated incident. We show that ratings exhibit persistent differences consistent with variation in rating agency incentives and underlying risk profiles across asset classes. We conclude that rules requiring ratings to perform comparably across asset classes will prove difficult to enforce. We advocate instead a regulatory framework that better distinguishes risk across asset classes. Our results should inform banks and regulators building on the Basel framework.

Number of Pages in PDF File: 55

Keywords: Credit Ratings, Credit Standards, Rating Agency, Ratings Comparability, Regulatory Capital

JEL Classification: D82, D83, G14, G24, G28


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Date posted: August 15, 2011 ; Last revised: August 4, 2015

Suggested Citation

Cornaggia, Jess and Cornaggia, Kimberly Rodgers and Hund, John, Credit Ratings across Asset Classes: A Long-Term Perspective (August 3, 2015). Available at SSRN: http://ssrn.com/abstract=1909091 or http://dx.doi.org/10.2139/ssrn.1909091

Contact Information

Jess Cornaggia
Georgetown University ( email )
3700 O Street, NW
Washington, DC 20057
United States
HOME PAGE: http://www.jesscornaggia.com
Kimberly Rodgers Cornaggia (Contact Author)
American University - Kogod School of Business ( email )
4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
John Hund
Rice University - Jesse H. Jones School of Management ( email )
6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States
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