How Classical Ratings Compare to Resilience Ratings – the S&P, Dow and NASDAQ

Artificial Intuition

The Probability of Default (PoD) of a company is the central concept behind a conventional rating. Ratings constitute a fundamental link between the markets and investors. Their importance cannot be overstated. However, traditional ratings, according to the Credit Rating Agencies themselves, are merely opinions. The process of computation of a Probability of Default of a company is not only subjective, it lacks transparency and, given the fact that it is not a strictly scientific process, it may be manipulated, leading to issues such as conflicts of interest and fraud.

The Big Three rating agencies have been providing ratings since the beginning of the 20-th century. The world was very different then. Traditional ratings have become dangerously outdated and, most importantly, not suited for a turbulent economy. As the complexity of the economy grows, conventional ratings produce results of increasing irrelevance. Mathematically correct but irrelevant. This has become apparent in 2007…

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