Deal on the Spot

Credit ratings are classified according to their time horizon and metric precision: Through-the-Cycle (TTC) vs. Point-in-Time (PIT):

Through-the-Cycle (TTC) vs. Point-in-Time (PIT)

  • TTC are designed for buy-and-hold investing. PIT should be used for repo/sales/trading.
  • TTC are designed for corporate credits, which are static. PIT should be used on structured securities, which are dynamic exposures.

TTC work only in stable macro-economic conditions.
PIT should be used in volatile economies.

 Cardinal vs. Ordinal Risk Measures

  • Alphanumeric ratings are based on either a numerical or an ordinal scale.
  • Intervals on an alphanumeric scale have a verifiable meaning.
  • Intervals on ordinal scales reflect the user’s sense of relative risk.
  • The objective meaning is “percentage defaults” or “expected loss.” The subjective meaning is “better” or “worse” credit quality.

If you do not believe NRSRO ratings reflect risk-realities, it is better to use a PIT, ordinal rating.

Waterfall Editor

Are your deals correctly scripted? Over 80% of rated deals reviewed by R&R are not. Liabilities are logically determined. Technical implementation is less a question of good and bad, more a question of right and wrong. – Elements of Structured Finance, p. 116.

ABSTRAK®

R&R Consulting developed the ABSTRAK® to reflect natural transitions of credit quality in structured securities as they occur.

PIT Rankings

The Point-In-Time (PIT) Ranking Tool is a user-friendly web-based deal ranking engine based on empirical data about security’s performance extracted from servicer reports.

Ann Rutledge Sylvain Raynes David Abitbol Iuliia Palamar Stacy Mosher Jeremy S. Taylor Dennis Toth