Our Structured Finance Rating Approach includes both quantitative techniques and qualitative judgment.
- Ratings of ABS are ultimately based on the Expected Loss concept. When assigning a rating, we attempt to identify all outcomes or paths which might lead to investors suffering losses, to quantify those losses, and to assign probabilities to each such path occurring. The rating is then based on the probability weighted loss to the investor.
- Assumptions used in the quantitative modeling of the cash flows are derived and conditioned by the analyst’s qualitative analysis of the underlying assets credit risk as well as a careful examination of the transaction’s structural and legal aspects.