Friday, May 30, 2008

Its a Bad Karma – Stupid!

Moody's Implied Ratings Lab Reveals Ambac, MBIA Turning to Junk

The team from Moody's Analytics, which operates separately from Moody's ratings division, uses credit-default swap prices as an alternative system of grading debt. These so-called implied ratings often differ significantly from Moody's official grades. The implied ratings frequently show that swap traders think debt is in more danger of defaulting than Moody's credit ratings signify. And here's the kicker: The swaps traders are usually right.

Posted by alan @ 06:01 PM (707 views)
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One thought on “Its a Bad Karma – Stupid!

  • Great find @alan,

    I used to work at a hedge fund (amongst many, many other lines of work) where we used all sorts of implied ratings and implied CDS prices to find arbitrage opportunities.

    It always amazed me how you could see what was going to blow up months ahead of the sheep general trading public.

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