ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Whereas S&P ratings are the agency’s opinion on the likelihood or probability of default by a corporate or sovereign, Moody’s ratings are based on expected losses, reflecting both on the likelihood of default and expected financial losses in the event of default (Loss Given Default).

Detailed explanation-2: -Just as individuals have their own credit report and rating issued by credit bureaus, bond issuers generally are evaluated by their own set of ratings agencies to assess their creditworthiness. There are 3 main ratings agencies that evaluate the creditworthiness of bonds: Moody’s, Standard & Poor’s, and Fitch.

Detailed explanation-3: -The bond ratings companies Moody’s and Standard & Poor’s provide analysis and ratings of government-and business-issued bonds. The purpose of these ratings is to evaluate the credit worthiness and likelihood of these bond issuers to repay the interest and principal as specified.

Detailed explanation-4: -Obligations rated Aaa are judged to be of the highest quality, with minimal risk. Moody’s short-term ratings, unlike our long-term ratings, apply to an individual issuer’s capacity to repay all short-term obligations rather than to specific short-term borrowing programs.