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Donald van Deventer
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Donald R. van Deventer founded the Kamakura Corporation in April, 1990 and is currently Chairman and Chief Executive Officer. Dr. van Deventer's emphasis at Kamakura Corporation is enterprise wide risk management and modern credit risk technology. The second edition of his newest book, Advanced... More
My company:
Kamakura Corporation
My blog:
Donald R. van Deventer's Kamakura Blog
My book:
Advanced Financial Risk Management, 2nd Edition 2013
  • Why Ratings Are Not Enough: Plot Of Default Probabilities Vs. Ratings 0 comments
    Jan 15, 2014 4:35 AM | about stocks: MHFI, MCO

    (click to enlarge)

    riskmap

    This graph plots the number of firms in each combination of legacy credit rating (columns) and default probability (rows). The upper left hand square for example shows how many AAA-rated firms have default probabilities between 0.00% and 0.02% (9). The squares are color code with red indicating the highest number of firms. The graph shows clearly the low degree of correlation default ratings and default risk. This low correlation is even more dramatic during the peak of the credit crisis in 2008-2009.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: services Stocks: MHFI, MCO
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