Which one is not true for credit rating agencies?

1- It rates the ability and willingness of debt issuing company regarding the payment of interest and principal when they arise.

2-It is the opinion of rating agency presented in symbolic form.

3- Credit rating recommend to purchase, sell or hold a particular security.

4- It only evaluates risk associated with that security.

Essay Question

Briefly explain the advantages and disadvantages of the CreditRisk


CreditRisk+ has the advantage that it is relatively easy to implement.

  • It focuses on default and requires relatively few estimates and inputs. For each instrument, only

the probability of default and LGD statistics are required.

  • One disadvantage of the approach is that it ignores migration risk.