Credit rating and pricing: Poles apart
Loading...
Authors
Author (Corporation)
Publication date
2018
Typ of student thesis
Course of study
Collections
Type
01A - Journal article
Editors
Editor (Corporation)
Supervisor
Parent work
Journal of Risk and Financial Management
Special issue
Risk and Financial Instability
DOI of the original publication
Link
Series
Series number
Volume
11
Issue / Number
2
Pages / Duration
27
Patent number
Publisher / Publishing institution
MDPI
Place of publication / Event location
Basel
Edition
Version
Programming language
Assignee
Practice partner / Client
Abstract
Corporate credit ratings remove the information asymmetry between lenders and borrowers to find an equilibrium price. Structured finance ratings, however, are informationally insufficient because the systematic risk of equally rated assets can vary substantially. As I demonstrate in a Monte Carlo analysis, highly-rated structured finance bonds can exhibit far higher non-linear systematic risks than lowly-rated corporate bonds. I value credit instruments under a four-moment CAPM, between and within some markets there is no one-to-one relation between expected loss (rating) and credit spread (pricing). The linear CAPM beta is insufficient, buyers and sellers need also the same information on non-linear risk to have an equilibrium.
Keywords
Subject (DDC)
Event
Exhibition start date
Exhibition end date
Conference start date
Conference end date
Date of the last check
ISBN
ISSN
1911-8074
1911-8066
1911-8066
Language
English
Created during FHNW affiliation
No
Strategic action fields FHNW
Publication status
Published
Review
Peer review of the complete publication
Open access category
Gold
License
Citation
Blöchlinger, A. (2018). Credit rating and pricing: Poles apart. Journal of Risk and Financial Management, 11(2), 27. https://doi.org/10.2139/ssrn.2602008