Sovereign Credit Risk Assessment with Multiple Criteria Using an Outranking Method

Diogo F. de Lima Silva, Julio Cezar Soares Silva, Lucimário G. O. Silva, Luciano Ferreira and Adiel T. de Almeida-Filho

Mathematical Problems in Engineering, 2018, vol. 2018, 1-11

Abstract:

In view of the records of failures in rating agencies’ assessments for sorting countries’ quality of credit in degrees of default risk, this paper proposes a multicriteria sorting model using reference alternatives so as to allocate sovereign credit securities into three categories of risk. From a numerical application, what was observed from the results was a strong adherence of the model in relation to those of the agencies: Standard & Poor's and Moody's. Since the procedure used by the agencies is extremely subjective and often questioned, the contribution of this paper is to put forward the use of an objective and transparent methodology to sort these securities. Given the agencies’ conditions for undertaking the assessment, a complete similarity between the results obtained and the assignments of the agencies was not expected. Therefore, this difference arises from subjective factors that the agencies consider but the proposed model does not. Such subjective and questionable aspects have been partly responsible for the credibility of these credit agencies being diminished, especially after the 2007-2008 crisis.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://downloads.hindawi.com/journals/MPE/2018/8564764.pdf (application/pdf)
http://downloads.hindawi.com/journals/MPE/2018/8564764.xml (text/xml)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:8564764

DOI: 10.1155/2018/8564764

Access Statistics for this article

More articles in Mathematical Problems in Engineering from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().