The credit ratings provided by ratings agencies:

Question

Quizplus · Accepted Answer

A) Credit ratings help to overcome information asymmetry as they provide an independent assessment of the creditworthiness of a borrower, making it easier for investors to evaluate the risk associated with different debt securities.
B) Credit agencies assess the creditworthiness of a debt issuer and provide an opinion on the likelihood that the issuer will default on its debt obligations.
C) Credit rating agencies are paid by the debt issuer to conduct the rating assessment and to publish the rating.
D) The reliability of credit ratings was called into question during the Global Financial Crisis (GFC), particularly in relation to mortgage-backed securities, which were given high ratings despite having significant credit risk.
E) Therefore, all of the above statements are correct.

The Credit Ratings Provided by Ratings Agencies