Bangkok--27 Sep--Standard & Poor's
Standard & Poor's uses proprietary default-probability models on a sample of U.S. speculative-grade issuers to generate a few basic predictions about the speculative-grade credit universe. As detailed in the report titled "From A Model's Perspective: Default And Industry Stress Outlook," recent models' output points to benign default risk over the next year. "This is aligned with our fundamental credit views and other quantitative projections," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.
Three of Standard & Poor's default-probability models draw on both market and fundamental data from a sample of U.S. speculative grade firms. The first model is a multiperiod hazard ratio based on firm-specific accounting data, capital market information, and economic data. The second model provides an average of the firm-specific probability of default (PD) derived from individual credit default swap (CDS) spreads. Both models output the average probability of default produced by aggregating individual firm-level default probabilities derived from their respective data sources. The final model uses the aggregate spread data for the leveraged loan market to derive a probability of default measure for the speculative-grade loan market.
The samples calibrating our models are drawn from the U.S. nonfinancial speculative-grade population. "The output from the three models provides another gauge of default pressure in the speculative-grade space," said Ms. Vazza. The cross-comparison of the three models is also useful, as each derives PD based on data from different arenas, i.e., single-name CDS, leveraged loans, and fundamental data and equity markets.
The report is available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760