Chapter 4. External and Internal Credit Ratings Practice Question set contains 11 pages covering the following learning objectives:
* Describe external rating scales, the rating process, and the link between ratings and default.
* Describe the impact of time horizon, economic cycle, industry, and geography on external ratings.
* Define and use the hazard rate to calculate unconditional default probability of a credit asset.*
* Define recovery rate and calculate the expected loss from a loan.*
* Explain and compare the through-the-cycle and at-the-point internal ratings approaches
* Describe alternative methods to credit ratings produced by rating agencies.*
* Compare external and internal ratings approaches.
* Describe and interpret a ratings transition matrix and explain its uses.
* Explain the potential impact of ratings changes on bond and stock prices.
* Explain historical failures and potential challenges to the use of credit ratings in making investment decisions.*
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