The Role of Credit Ratings
Investors in a company’s debt rely on the company’s credit rating to determine whether the risk is worth taking. In this video, Moorad explains what a credit rating is, how a formal credit rating is calculated and how it is used to determine the level of risk of holding a particular debt issue.
Overview
Investors in a company’s debt rely on the company’s credit rating to determine if the risk that such debt represents is one that they would wish to take, in return for the expected reward that holding the debt issue should bring. Hence, having a high credit rating is of great importance to issuers of debt.
Key learning objectives:
What is a credit rating?
What are credit ratings applied to?
What two methods do investors employ in measuring credit risk?
Summary
Expert
Moorad Choudhry
Former senior banker with almost 30 years experience. Moorad has held senior roles in commerical, investment and retail banking. He has also spent the last five years as a visiting professor.
