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    Quantitative Research

    Quantitative Research

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    Conalvias Construcciones S.A.S. Displayed Increasing Default Risk Starting 18 Months Prior to Default

    Conalvias Construcciones S.A.S., a Colombian construction company, was unable to meet its debt payments. Moody's Analytics EDF™ (Expected Default Frequency) metric and Early Warning Toolkit highlighted the company's default risk 18 months before default. This case study shows how to use these tools to assess risk.


    The Role of Banks in Illiquid Credit Markets, and the Disruption and Evolution of Credit Portfolio Management

    The combination of new entrants, new technologies and (unintended) consequences of regulatory and accounting rules are driving banks to collect more data and to develop sophisticated tools when designing ever-more robust credit portfolio strategies.


    RiskCalc United States Stressed EDF and LGD Model Approach v3.0

    We have developed an upgraded stress testing model that can be applied to any internal rating framework and is compatible with the RiskCalc™ U.S. 4.0 Corporate, REO, Dealership, and NFP models. This paper presents the updated PD model that incorporates new data and more sectors.


    Usage and Exposures at Default of Corporate Credit Lines — An Empirical Study

    Using a unique data set pooled from multiple U.S. financial institutions, we empirically study the credit line usage of middle-market corporate borrowers.


    The use of carrier approximation methods for projected capital metrics with an application to the IFRS 17 risk adjustment.

    In this paper we explore the use of the carrier approximation for the multi-year projection of risk and capital metrics. Through an annuity book run-off case study we outline the key factors influencing the performance of the carrier method when applied to the projected IFRS 17 risk adjustment and the projected Solvency II solvency capital ratio (SCR).

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    Moody's Analytics Webinar: Topics@CreditEdge – Dealing With Fallen Angel Risk

    Fallen Angel risk results from the possibility and price impact of bond downgrades from investment grade (IG) into high yield (HY).

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    Dealing With Fallen Angel Risk

    We test the early warning power of the CreditEdge Deterioration Probability (DP) metric for Fallen Angel downgrades.

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    Earnings Volatility, Share Price Performance, and Credit Portfolio Management Under CECL and IFRS 9

    This paper studies how earnings volatility induced by credit risk can impact share price performance for financial institutions under CECL and IFRS 9, and quantifies the benefit of an active credit risk management practice.

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    Moody's Analytics Webinar: RiskFrontier™ 5.3 and 5.4 Release and GCorr™ 2018 Update

    Moody's Analytics is pleased to announce the release of versions 5.3 and 5.4 of the RiskFrontier software. The latest version includes the following enhancements:

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    Moody's Analytics Webinar: Topics@CreditEdge Navigating Choppy Markets - Focus on Asia

    Since the Asia crisis, most countries in Asia have displayed a longer term secular trend of falling default risk.


    Sovereign & Size-Adjusted EDF-Implied Rating Template (for Private Firms)

    RiskCalc™ EDF™ (Expected Default Frequency) values and agency ratings are widely used credit risk measures. RiskCalc EDF values typically measure default risk for private companies, while agency ratings are only available for rated companies. A RiskCalc EDF value measures a company's standalone credit risk based on financial statement information, while an agency rating considers qualitative factors such as Business Profile, Financial Policy, external support, and country-related risks. Moody's Analytics new Sovereign & Size-Adjusted EDF-Implied Rating Template combines RiskCalc EDF values with additional factors to provide a rating comparable to agency ratings for private companies. The new template applies to RiskCalc EDF values across numerous geographies and regulatory environments. With the new template, users can generate a rating more comparable to an agency rating than RiskCalc EDF values or EDF-implied ratings. Analyzing data from 3,900+ companies in 60+ countries, we find that sovereign rating and total asset size, in addition to EDF value, have a statistically significant impact on an agency rating — our quantitative template incorporating these three variables reliably estimates agency ratings in a robust fashion.


    Identifying At-Risk Names in Your Private Firm Portfolio — RiskCalc Early Warning Toolkit

    This report outlines a practical approach for using RiskCalc EDF credit measures to effectively monitor large portfolios of private firms and to proactively identify at-risk names. The RiskCalc Early Warning Toolkit Excel add-in is an easy to use, yet comprehensive tool that allows users to focus costly and scarce resources on a highly targeted selection of the most at-risk names in their portfolios. This research for private firms compliments previous research on Early Warning Toolkit for public firms. The Early Warning Toolkit identifies at-risk names within a private firm portfolio well before default, using a number of different EDF-related risk metrics.