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Rating the Sovereigns: Does It Work?
Mošnová, Alžběta ; Janský, Petr (advisor) ; Lopušník, Ondřej (referee)
The sovereign rating business has developed very fast in the last two decades. The recent economic turmoil proved how important it is to set up sovereign ratings in a correct, objective, transparent way and at the right time. The goal of this thesis is to look under the surface of Rating Agencies and analyze their sovereign rating methodologies from the economic perspective. I describe the individual indicators of the sovereign rating assessment, as well as the differences in the sovereign rating methodologies of the three biggest Rating Agencies. The empirical section tries to verify the ability of sovereign ratings to predict sovereign default as well as it explores the possibility that one of the three biggest Rating Agencies would provide systematically higher or lower sovereign ratings.
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Understanding rating movements in euro area countries
Brůha, Jan ; Karber, Moritz ; Pierluigi, Beatrice ; Setzer, Ralph
This paper investigates the link between sovereign ratings and macroeconomic fundamentals for a group of euro area countries that recorded rating downgrades during the euro area sovereign debt crisis. We apply an elaborated econometric estimation technique, based on a Bayesian ordered probit model, to understand how the decisions of rating agencies can be explained by economic developments. The estimated model reproduces historical ratings by using a small number of economic and institutional variables which seem to effectively summarize the large number of criteria used by Moody’s, Standard and Poor’s and Fitch in their assignment of sovereign ratings. Our results suggest that the size of the downgrades observed since the start of the sovereign crisis has been broadly in line with the deterioration of economic fundamentals for most countries.
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Central European government bonds
Kalafut, Patrik ; Brada, Jaroslav (advisor) ; Kováč, Michal (referee)
This diploma thesis focuses on the issue of the Central European bond market and the analysis of state securities of the Vysegrad Region. The first chapter describes the state bond and its typical features. The second chapter is devoted to two specific forms of a bond, namely an inflated bond and a zero-coupon bond. This part is not only theoretical, but is also practically focused on the analysis of these less widely used forms of bonds. The third chapter discusses the knowledge gained in the theoretical portion, through the comparison of government bonds and the empirical yield curve. The second half is focused on the comparison of sovereign bond trades and rating developments in the countries concerned.
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Analysis of changes in an approach to state's rating after the financial crisis
Horáková, Eva ; Blahová, Naďa (advisor) ; Šíma, Ondřej (referee)
This thesis deals with globalisation of markets. It focuses on examining the economic crisis of 2008 and 2010 and on how individual countries can cope with deteriorating of macroeconomic values, especially with financial implications of this situation. The thesis also examines credit rating agencies as indicators of financial soundness of investment instruments, to which is often reffered as to culprits of the crisis for their reaction to the development of the mortgage market. The thesis defines the rating in the concept of sovereign states and describes the market of credit rating agencies. It further evaluates individual rating agencies and practices in the context of the crisis, bringing a comprehensive picture of the role they played at the beginning of the crisis. It also attempts to outline more points of view on the previously unilaterally and predominantly negatively perceived issue of reputation of credit rating agencies.
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Rating the Sovereigns: Does It Work?
Mošnová, Alžběta ; Janský, Petr (advisor) ; Lopušník, Ondřej (referee)
The sovereign rating business has developed very fast in the last two decades. The recent economic turmoil proved how important it is to set up sovereign ratings in a correct, objective, transparent way and at the right time. The goal of this thesis is to look under the surface of Rating Agencies and analyze their sovereign rating methodologies from the economic perspective. I describe the individual indicators of the sovereign rating assessment, as well as the differences in the sovereign rating methodologies of the three biggest Rating Agencies. The empirical section tries to verify the ability of sovereign ratings to predict sovereign default as well as it explores the possibility that one of the three biggest Rating Agencies would provide systematically higher or lower sovereign ratings.
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Sovereign entities - financing, credit risk and rating
Navrátil, Jan ; Blahová, Naděžda (advisor) ; Gevorgyan, Kristine (referee)
The echoes of Eurozone debt crisis brought into question the sovereign risk of advanced economies. Understanding factors that influence this risk is key to avoid similar crisis of public debt financing in the future. The main aim of this thesis is to identify which factors influence sovereign entity financing and how the problems of public debt financing arise. This is reached through analysis of debt crisis development and its causes in the GIPS economies.
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Rating agencies and their importance for financial markets and economic policy
Svačina, Lubomír ; Jílek, Josef (advisor) ; Pícl, Michal (referee)
This paper performs an analysis of rating agencies and evaluates their importance for financial markets and economic policy. The importance of rating agencies and their ratings is assessed based on two criteria -- independence and accuracy of ratings, both criteria are analysed in detail from different views throughout this paper. Independence of rating agencies is considered in terms of historical context and the most important development milestones and trends, in terms of market positioning and demand for services of rating agencies, in terms of ownership structures and financing models. Accuracy of ratings is considered by historical analyses of sovereign ratings from the times of the Asian financial crisis, the European debt crisis and sovereign debt defaults and restructuralisations since 1990. In the issue of independence, the paper has revealed several risk factors, mainly in relation to financing model "issuer pays". In the issue of sovereign rating accuracy, the paper has come to a conclusion that rating agencies were only able to identify the most visible negative trends -- defaults and restructuralisations of debts in countries, where the problems had developed gradually. On the other hand, in surprising and sudden cases such as the Asian financial crisis and the European debt crisis, rating agencies were suprised just like the wider investor's public.
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Prediction of the rating agencies position in the financial markets
Šlachtičová, Zuzana ; Blahová, Naděžda (advisor) ; Marková, Jana (referee)
The thesis is devoted to the position of rating agencies in the financial markets. The main aim is to predict the position of these companies, which is currently mainly influenced by the European politicians. Politicians criticize them and try to limit their power. The essence of this thesis is to summarize the reasons for their criticism, focusing on reduction of sovereign ratings. Then it's discussed a downgrading the USA and France. For the first time in a history they lost their AAA rating. The last chapter is devoted to the possible position of rating agencies. The first option is the establishment of the European rating agency, the other one is tightening regulation and the last is a situation if the rating agencies were abolished.
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Developement of cretit rating in the debt crises - the situation of Italy
Kašička, Jan ; Blahová, Naděžda (advisor) ; Brada, Jaroslav (referee)
The thesis is primarily focused on the methodology of credit rating and characteristic aspects of each of the evaluated areas. The knowledge acquired in the first part are then applied in the second part to the situation of Italy during the debt crisis. The thesis is aimed to the developement of sovereign rating of the country. Whitin selected topic I am focused on the evaluation criteria and I poin out the qualitative and quantitative characteristics of this process. Sub-goal of the thesis is to determine the role of rating agencies in the developement of the global financial crisis, which caused the recession and was gradually transformed into a debt crisis.
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The influence of crises on development of credit rating of some specific countries and banks
Ulmanová, Tereza ; Zetek, Pavel (advisor) ; Prokop, Martin (referee)
The aim of this thesis is to generally characterize credit rating. In its analytical part it deals with credit rating development of some specific countries and banks. The aim is to analyse this credit rating development, to find out its causes and consequences and to point to the interconnection between the countries, the parent banks and their subsidiaries. The paper describes the demands placed on credit rating agencies, too, and governments' efforts to control their activities. The paper shows that the trustworthiness of the rating agencies was broken after the global financial crisis came. Since then are the rating agencies more careful and they are not afraid of decreasing the credit rating in countries with problems. During last four years came to the adjustment of credit rating downwards in many countries especially in EU.
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