Comparing the Accuracy of Default Predictions in the Rating Industry: The Case of Moody's vs. SP

André Güttler, Walter Krämer
2003 Social Science Research Network  
We consider 1927 borrowers from 54 countries who had a credit rating by both Moody's and S&P as of the end of 1998, and their subsequent default history up to the end of 2002. Viewing bond ratings as predicted probabilities of default, we show that it is unlikely that both agencies are well calibrated, and that the ranking of the agencies depends crucially on the way in which probability predictions are compared. Research supported by Deutsche Forschungsgemeinschaft (DFG) under SFB 475. We are
more » ... er SFB 475. We are grateful to our colleagues at KMW (Mark Wahrenburg, Jan-Pieter Krahnen, Martin Weber) and to Atanasios Mitropoulos for helpful criticism and comments.
doi:10.2139/ssrn.450600 fatcat:7k6i57kewfdj3jdl2rpzbz3kn4