The Ratings Agencies — More Perfect Information?

Colin Read
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Colin Read: SUNY College

Chapter 23 in The Fear Factor, 2009, pp 184-187 from Palgrave Macmillan

Abstract: Abstract Risk assessment is a highly technical problem. If each bond investor was to try to estimate the downside risk of each asset under consideration, it would be likely that few investors would be qualified to buy bonds or other risk bearing fixed income securities. If such were the case, those issuing the bonds would have few buyers, and would then have to offer a commensurately higher interest rate to attract sufficient interest and raise sufficient capital. With such uncertainty and such an advantage to most skilled analyses, it would be smart for the bond issuers or investment houses marketing the bond issues to hire a risk-assessment agent to analyze the proposed security and give it a letter grade that would signal the level of risk to the marketplace. This is the job of the ratings agencies.

Keywords: Rating Agency; Hedge Fund; Perfect Information; Downside Risk; Investment House (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-25086-4_24

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DOI: 10.1057/9780230250864_24

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