Standard Rating

◷ Reading Time: 4 minutes

Introduction

The sample shows how to build a model that can be used to standardize credit ratings and ranking.

Scenario

There are several agencies that provide credit rating systems. They do not attach a hard number of probability to default. So in a credit risk determination, those ratings of different agencies must be standardized for a particular product and specific financial organization. In this example, we used different credit ratings from external agencies such as Moody’s, S&P, and Fitch to create a standardized system to combine the rating from different agencies and rank them against a standard rating.

Running the Sample

• Open the file DetermineStandardRating.xml

• Click on the Logic Run template.

• Click on any given template.

• Debug the sample by clicking on the debug button in the Logic Run Template window.

• You can click the ‘Next Step’ button to go step by step to follow the flow.

• Now you can see the output values in the ‘Parameters’ window. Check the value on ExternalCreditRating

Process Steps

The process contains the following steps to Determine Standard Ranked Rating.

1. Standard Credit Rating: Mapping and Combining the Credit Rating of multiple agencies to a “Standard Rating”
2. Credit Rating Rank: Ranking “Standard Rating”
3. Selecting the “Standard Credit Rating” based on the Rank.

Project Description

The project contains the following documents.

Decision Graph

• DetermineStandardRating.xml – shows the main decision flow
• StandardCreditRating.xml – combining the Credit Rating

Decision Table

• FITCH.xml – derive standard rating from native FITCH rating
• MOODY.xml – derive standard rating from native MOODY rating
• SP.xml – derive standard rating from native S&P rating
• CreditRatingRank.xml – ranking the standard rating

Fact Concept

• RankedRatingConcept.xml – Define ‘ExternalCreditRating’ and ‘StandardRankedRating’ objects

The Flow Design

1. Define the ExternalCreditRating as an input object and StandardRankedRating as an output object.

• RankedRatingConcept.xml

2. StandardCreditRating.xml : Mapping and Combining the Credit Rating of multiple agencies to a “Standard Rating .

3. FITCH.xml, MOODY.xml, SP.xml: Mapping native agency ratings against standard rating. Following Decision table shows the sample of MOODY’s rating mapping.

4. CreditRatingRank.xml – Ranking against the Standard Rating. This Decision Table ranks the credit ratings on a scale of 0 (lowest) to 22 (highest) highest rank as below.

5. DetermineStandardRating.xml : The main Decision Graph for determine the standard ranked rating using Standard Credit Rating and Credit Rating Rank with the use of CTRISKS Rating Standard(knowledge source).

Download the project

Use the attachment at the end of the page to download the sample project.