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.
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.