Rating Methodology: New Look and New Horizons

Peter Brusov, Tatiana Filatova and Natali Orekhova
Additional contact information
Tatiana Filatova: Financial University under the Government of Russian Federation
Natali Orekhova: Financial University under the Government of Russian Federation

Chapter Chapter 29 in The Brusov–Filatova–Orekhova Theory of Capital Structure, 2023, pp 675-710 from Springer

Abstract: Abstract In the previous chapter, a new approach to rating methodology has been suggested. Key factors of a new approach were the following: (1) The adequate use of discounting of financial flows virtually not used in existing rating methodologies, (2) The incorporation of rating parameters (financial “ratios”) into the perpetuity limit of modern theory of capital structure (Brusov–Filatova–Orekhova (BFO) theory): for companies with infinite lifetime. In the current paper, further development of a new approach has been done. We have generalized it for the general case of modern theory of capital structure (Brusov–Filatova–Orekhova (BFO) theory): for companies of arbitrary age. A serious modification of BFO theory in order to use it in rating procedure has been required. It allows to apply obtained results for real economics, where all companies have finite lifetime, introduce a factor of time into theory, estimate the creditworthiness of companies of arbitrary age (or arbitrary lifetime), introduce discounting of the financial flows, using the correct discount rate, etc. This allows to use the powerful tools of BFO theory in the rating. All these create a new base for rating methodologies.

Keywords: Rating; Rating methodology; Discounting of financial flows; Brusov–Filatova–Orekhova theory; Coverage ratios; Leverage ratios (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:sprchp:978-3-031-27929-4_29

Ordering information: This item can be ordered from
http://www.springer.com/9783031279294

DOI: 10.1007/978-3-031-27929-4_29

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().