Market-implied ratings gained importance as efficient early warnings of official credit rating migrations. We build a two-dimensional implied rating system based on bonds and CDS spreads, and test its forecast performances on a set of worldwide sovereign issuers. We show that the method efficiently uses the information from both markets, and is able to outperform implied ratings based on recent machine learning techniques. (c) 2022 Elsevier Inc. All rights reserved.
Bond-CDS implied rating systems
Colozza, Tommaso;Marmi, Stefano;Nassigh, Aldo;Regoli, Daniele
2022
Abstract
Market-implied ratings gained importance as efficient early warnings of official credit rating migrations. We build a two-dimensional implied rating system based on bonds and CDS spreads, and test its forecast performances on a set of worldwide sovereign issuers. We show that the method efficiently uses the information from both markets, and is able to outperform implied ratings based on recent machine learning techniques. (c) 2022 Elsevier Inc. All rights reserved.File in questo prodotto:
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Colozza_Marmi_Nassigh_Regoli_bond_cds_2022-s2.0-S0020025522006521-main.pdf
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