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Credit Ratings across Asset Classes

Jess Cornaggia

Georgetown University

Kimberly Rodgers Cornaggia

American University - Kogod School of Business

John Hund

Rice University - Jesse H. Jones School of Management

June 14, 2014

We employ comprehensive credit rating histories and an array of traditional and novel metrics to compare the quality (migration and accuracy) of ratings across asset classes. We are first to quantify differences in ratings quality (a) of municipal and sovereign debt, relative to corporate bonds (b) across structured product types, and (c) across a 30-year time series. Overall, our results indicate not only that ratings quality differs across asset classes, but that asset classes have fundamentally different underlying risk profiles. We conclude that the Dodd-Frank mandate to standardize ratings will prove difficult to enforce and that the Basel II risk-weighting scheme does not adequately distinguish credit risk across asset classes.

Number of Pages in PDF File: 51

Keywords: Credit Ratings, Municipal Bonds, Sovereign Credit Risk, Public Finance, Structured Finance, Regulatory Capital

JEL Classification: G14, G24, G28, G32

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Date posted: August 15, 2011 ; Last revised: June 15, 2014

Suggested Citation

Cornaggia, Jess and Cornaggia, Kimberly Rodgers and Hund, John, Credit Ratings across Asset Classes (June 14, 2014). 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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