Rating models: emerging market distinctions

TL;DR

This paper examines the unique features of rating systems in emerging markets and discusses the development of econometric models for remote ratings forecasts to enhance risk management.

Contribution

It provides an analysis of current rating system peculiarities and addresses challenges in developing econometric models for emerging market companies.

Findings

Emerging markets have distinct rating system features.

Econometric models face specific challenges in these markets.

Improved remote rating forecasts can aid risk management.

Abstract

The Basel II Accords have sparked increased interest in the development of approaches based on internal ratings systems and have initiated the elaboration of models for remote ratings forecasts based on external ones as part of Risk Management and Early Warning Systems. This article evaluates the peculiarities of current ratings systems and addresses specific issues of development of econometrical rating models for emerging market companies.