Downgrade risk, Financial Management

Market participants' measure the default risk of an issue on the basis of the credit ratings that the credit rating agencies assign to the issues. Once rating is assigned, the agency continuously monitors the credit quality of the issuer and updates the ratings from time to time. Rating agency is empowered to either upgrade or downgrade the ratings. An unexpected downgrade increases the credit spread and a fall in the bond's price. The risk involved here is the downgrade risk and is closely related to credit spread risk.

Posted Date: 9/10/2012 1:23:30 AM | Location : United States







Related Discussions:- Downgrade risk, Assignment Help, Ask Question on Downgrade risk, Get Answer, Expert's Help, Downgrade risk Discussions

Write discussion on Downgrade risk
Your posts are moderated
Related Questions
The process of valuing a callable bond is similar to that of an option-free bond, except for one thing - when the call option may be exercised b

Mistakes in Linton's evaluation (1) The preliminary investment in working capital should be offset by a working capital release in the final year, assuming a constant level of

explain the significance of operating leverage and financial with the help of example?

A drug company has developed a new painkiller for chronic pains, although it is doubtful whether the new drug actually has any effect. The company conducts a double-blind experimen

Cyclical Variation By cyclical variations, we refer to the long-term movement of the variable about the trend line. Therefore, does the movement of the actual series about a tr

Q. Example on Walters dividend model? Example: - The following information is obtainable in respect of a firm: Capitalisation Rate (Ke)                     = 10% Earning

Explain in detail various sources of finance. Which is the most appropriate one?

Homework 1. Suppose you deposit $18,000 into an account today that earns 6% interest per year, and you do not withdraw the money for 21 years. What will be the balance in the acco

Compare diversifiable and nondiversifiable risk. Which do you think is more important to financial managers in business firms? Diversifiable risk is able to be dealt with by of

What is the major difference in the obligation of one with a long position in a futures (or forward) contract in comparison to an options contract? Answer: A futures or forward c