Credit ratings explained
About this course
Moody's / S&P / Fitch scales side-by-side, historical default rates, migration matrices, and how to use ratings as the foundation of your TMSS counterparty selection.
What you'll learn
- What is a credit rating?
- What ratings predict
- Rating migration
- Using ratings in your TMSS
Part of these pathways
Related courses
- Bank credit analysis
- CDS spreads
- LA Credit Analysis
- Interest rate risk
- Liquidity & cashflow forecasting
- Counterparty concentration risk
Common questions
What is Credit rating?
An opinion about the relative creditworthiness of an issuer or instrument, expressed as a letter grade. Issued by recognised Credit Rating Agencies (CRAs) — Moody's, S&P and Fitch dominate.
What is Credit watch?
Indicates a rating may be changed (in either direction) within ~90 days due to a specific event. Less common than outlook changes.
What is Default rate?
Historical proportion of issuers with a given rating that have defaulted within a defined period (typically 1, 5 or 10 years).
What is ESG rating?
A separate set of ratings (from CRAs and specialist agencies) covering environmental, social and governance factors. Increasingly relevant for LA counterparty selection but separate from credit ratings.
What is Fitch?
One of the three major CRAs. Uses the same AAA-D scale as S&P. Sometimes considered the third-rated of the major three but widely accepted.
What is High yield (sub-investment grade)?
Ratings below BBB-/Baa3. Higher default risk; LAs typically prohibited from holding these.