A market-implied rating estimates the market observed default probability of an individual, corporation, or even a country. Indeed, a credit rating is simply a probability of default.[1] The methodology used by Moodys consists in a median piecewise fit of the ratings to the credit defaut swap data observed on the market.[2] S&P however uses a log regression between the log cds and the ratings equivalent number, adjusted to firm specifics, continent, and outlook.[3][4]
See also
editReferences
edit- ^ "Fitch Equity Implied Rating and Probability of Default Model". Defaultrisk.com. Retrieved 1 July 2022.
- ^ Moody's Credit Strategy Group, Viewpoints, Moody's, 2007
- ^ How Standard & Poor's arrives at Market Derived Signals, S&P, 2009
- ^ "Calculation of Market Implied Ratings for over 100 financial institutions, over time". Sourceforge.net. 2009.