Measuring the Volatility of Credit Ratings
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Date: 12-13-2007
Start Time:
5:30pm
End Time: 7:00pm
Speaker: William Morokoff, Standard and Poor's
Location: Park Avenue Plaza at 55 East 52nd Street
ABSTRACT
Credit ratings, whether produced by a credit rating agency or
a
financial institution's internal ratings process, result from a
complex
combination of qualitative and quantitative analysis, expert
opinion, market
and historical data, and other criteria. The ratings
may address probability
of not receiving promised interest or principal
payments, expected loss, or a
number of other risks. Any meaningful
ratings criteria cannot, however, lead
to static ratings, but rather
must allow for transition as market conditions
and other factors change.
The volatility of the rating measure for various
asset classes exposed
to different risk factors then becomes a question of
substantial
interest.
This talk will consider some of the issues
associated with measuring
ratings performance and examine the importance of
correlation in
interpreting historical transitions. We will then consider
various ways
of measuring ratings volatility for corporate and structured
finance
entities, and discuss the computational challenges associated
with
implementing these methods.
BIO
William Morokoff is Standard
& Poor's Chief Quantitative Analyst and is
the Global Head of
Quantitative Analytics. Bill is responsible for
leading the development and
application of quantitative methodologies
for all of Standard & Poor's
Credit Market Services. In partnership with
Structured Finance Ratings,
Corporate Ratings and Risk Solutions, his
team is also responsible for
research support of the quantitative models
and criteria used in Standard
& Poor's products and services. Bill has
worked extensively in credit
and market risk modeling, with a research
focus on numerical analysis for
portfolio risk management problems.
Bill is also active in the academic
community, serving as an associate
editor for the SIAM Journal on Applied
Mathematics, as well an adjunct
professor of mathematical finance in Columbia
Univerisity's MFE program
and an advisor to the mathematics department at
the New Jersey Institute
of Technology.
Prior to joining S&P, Bill
was a senior member of the credit research
group at Moody's KMV, leading the
new product research group and
ultimately heading the research team. Before
that, he worked in
quantitative market risk management as a vice president at
Goldman
Sachs.
Bill holds a Ph.D. in mathematics from the Courant
Institute at New York
University, where he specialized in Monte Carlo
methods and numerical
analysis. He also received a B.S. in chemical
engineering from Purdue
University.
*There will be a cocktail following the event.
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