Market Implied Ratings

Risk Magazine, July 2003

15 Pages Posted: 13 Aug 2003

See all articles by Ludovic L. Breger

Ludovic L. Breger

Morgan Stanley - Fixed Income Research

Lisa R. Goldberg

University of California, Berkeley; Aperio Group

Oren Cheyette

Loomis Sayles

Abstract

Recent high-profile defaults of investment grade bond issuers have demonstrated the weakness of conventional ratings in rapidly changing circumstances. We propose a simple method to derive market-based ratings from spread data, and show that classifying bonds using such ratings provides a more reliable basis for modeling return relationships than does a classification driven by agency ratings.

Keywords: Credit rating, risk, market implied ratings

Suggested Citation

Breger, Ludovic L. and Goldberg, Lisa R. and Cheyette, Oren, Market Implied Ratings. Risk Magazine, July 2003, Available at SSRN: https://ssrn.com/abstract=402800 or http://dx.doi.org/10.2139/ssrn.402800

Ludovic L. Breger (Contact Author)

Morgan Stanley - Fixed Income Research ( email )

2100 Milvia Street
Berkeley, CA 94704
United States
510-649-4613 (Phone)
510-848-0954 (Fax)

Lisa R. Goldberg

University of California, Berkeley ( email )

Department of Statistics
367 Evans Hall
Berkeley, CA 94720-3860
United States

Aperio Group ( email )

3 Harbor Drive
Suite 315
Sausalito, CA 94965
United States

Oren Cheyette

Loomis Sayles ( email )

555 California St
San Francisco, CA 94104
United States
415 364-5308 (Phone)

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