The U.S Subprime Mortgage Crisis: An analysis of Rating Transitions and The Role of Credit Rating Agencies

Sethi, Rahul (2008) The U.S Subprime Mortgage Crisis: An analysis of Rating Transitions and The Role of Credit Rating Agencies. [Dissertation (University of Nottingham only)] (Unpublished)

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The ongoing credit crisis has virtually engulfed all the biggest financial markets in the world and an end to this turmoil seems very far off at this moment in time. But it is very essential to understand the root cause of this crisis, which began in mid-2007 in the United States of America due to the collapse of the housing market. This paper

starts with the factors leading to the crisis and focuses on one of the key players in this whole fiasco that played a very pivotal role in the origination of this crisis and that is The Credit Rating Agencies.

This paper is devoted to analyze the rating transitions by one of the three biggest rating agencies in the world i.e. Fitch Ratings. The analysis includes an in-depth study of the ratings of the structured financial securities issued by Fitch Ratings during 2007 in the

U.S. by comparing them with the historical ratings as well as long-term averages.

Furthermore, it tries to draw a relation between the rating downgrades and the number of defaults that occurred in the year 2007. Taking this analysis forward, it also conducts a qualitative study using critical commentary by discussing a key paper by Daniel Covitz and Paul Harrison (2003) where they proved that reputation is more important for credit rating agencies than conflict of interest. This paper tries to bring forward evidences from various sources to prove that although it is very difficult to statistically prove the presence of conflicts of interest within these agencies, but still this is not enough to prove that it is completely absent.

Item Type: Dissertation (University of Nottingham only)
Keywords: Subprime Crisis, Rating Agencies, Conflict of Interest
Depositing User: EP, Services
Date Deposited: 02 Feb 2009
Last Modified: 16 Sep 2016 11:01

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