TY - JOUR T1 - The Complementary Nature of Ratings and Market-Based Measures of Default Risk JF - The Journal of Fixed Income SP - 38 LP - 47 DO - 10.3905/jfi.2007.688964 VL - 17 IS - 1 AU - Gunter Löffler Y1 - 2007/06/30 UR - https://pm-research.com/content/17/1/38.abstract N2 - Agency ratings and market-based measures of default risk are useful complements. Combining the two improves the prediction of defaults over the use of a single measure. While in-sample analysis suggests that one should give more weight to ratings as the horizon increases, or issuers become less risky, a simple equal-weight combination of ratings and market-based measures is hard to beat out of sample. The results suggest that both ratings and market-based measures provide genuine information of their own.TOPICS: Fixed income and structured finance, credit risk management, analysis of individual factors/risk premia ER -