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obligor default rating
Hi,I wanted to ask a general question regarding missing data in credit portfolio, i.e. what if some obligors are not assigned a credit rating. What would be the best approach to take, i.e. is is fine to just take an average of all ratings and just assign an average rating to the missing obligors, or is there a better more cosistent way of assigning ratings?Are there perhaps some academic/professional papers regarding missing data in a credit portfolio.Thanks
obligor default rating
QuoteOriginally posted by: icirovicHi,I wanted to ask a general question regarding missing data in credit portfolio, i.e. what if some obligors are not assigned a credit rating. What would be the best approach to take, i.e. is is fine to just take an average of all ratings and just assign an average rating to the missing obligors, or is there a better more cosistent way of assigning ratings?Are there perhaps some academic/professional papers regarding missing data in a credit portfolio.ThanksHow about taking the average rating across the industry?
obligor default rating
If you have access to market data e.g. Bond or CDS term structures for the obligor, you can generate a Market/Spread Implied Rating. This basically works by comparing which rating (or sector/rating) average curve the obligor's curve lies closest to.
obligor default rating
Thanks a lot.I also was thinking about taking the industry average. One important thing also is the connection with the Basel II. If you have some portion of the portfolio rated in one way, e.g. via some model, and then assign average ratings for the missing ratings how would this affect consistency of a rating system that Basel Accord asks for?Thanks