Understanding rating migration

rating migration: how does it affect the investor?

Level - INTERMEDIATE

An investor is affected when a bond is upgraded or downgraded by a rating agency, as the rating migration can affect bond rates and prices. Migration trends depend on the overall credit environment, and they in turn affect credit spreads in the market. Watch this video to learn more about the impact of ratings migration.

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Rating migration: How does it affect the investor?

 An investor is affected when a bond is upgraded or downgraded by a rating agency, as the rating migration can affect bond rates and prices. Migration trends depend on the overall credit environment, and they in turn affect credit spreads in the market. Watch this video to learn more about the impact of ratings migration.

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    1.The credit risk inherent in holding non-government bonds can be minimized by



  • Buying low rated bonds when quality of credit environment is high
  • Selecting creditworthy bonds, and monitoring for migration
  • Holding bonds only when credit ratio is low
  • 2.The lowest rating migration rates are observed for



  • A' rated bonds
  • B' rated bonds
  • AAA' rated bonds
  • 3.During a period of high economic growth, a positive credit environment leads to



  • More upgrades than downgrades
  • Exactly matching upgrades and downgrades
  • Less upgrades than downgrades
  • 4.Other things being equal, for which credit environment is the credit spread of a AAA bond over the benchmark g-sec rate likely to be the greatest?



  • Credit ratio of 2.0
  • Credit ratio of 1.0
  • Credit ratio of 0.3
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