Financial Risk Manager Part 1
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A Swiss chemical company is considering issuing bonds to finance its planned expansion. A risk analyst involved in the capital raising program at the company is studying the external agency rating process to gain a better understanding of the implications of agency ratings for the firm's financing plans. Which of the following statements is correct?
A
Agency ratings tend to produce identical default rates for companies in the same industry but located in different countries.
B
Empirically, changes in bond and stock prices tend to be greater in cases of ratings downgrades than ratings upgrades.
C
Rating agencies produce point-in-time ratings, as these are designed to provide the best current estimate of future default probabilities.
D
Rating agencies provide outlooks to indicate the potential for a change in rating in the short-term, and use watchlists to indicate medium-term changes.