Abstract

http://ssrn.com/abstract=1909091
 
 

References (13)



 


 



Credit Ratings across Asset Classes: A Long-Term Perspective


Jess Cornaggia


Pennsylvania State University - Department of Finance

Kimberly Rodgers Cornaggia


Pennsylvania State University - Department of Finance

John Hund


Rice University - Jesse H. Jones School of Management

November 10, 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: 56

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: November 11, 2015

Suggested Citation

Cornaggia, Jess and Cornaggia, Kimberly Rodgers and Hund, John, Credit Ratings across Asset Classes: A Long-Term Perspective (November 10, 2015). Available at SSRN: http://ssrn.com/abstract=1909091 or http://dx.doi.org/10.2139/ssrn.1909091

Contact Information

Jess Cornaggia
Pennsylvania State University - Department of Finance ( email )
University Park, PA 16802
United States
HOME PAGE: http://jesscornaggia.com
Kimberly Rodgers Cornaggia (Contact Author)
Pennsylvania State University - Department of Finance ( email )
306 Business Bldg
University Park, PA 16802
United States
814-865-2243 (Phone)
814-865-3362 (Fax)
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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