The current credit rating system is a buy-and-hold system. It is completely unsuited to measuring the credit risk of structured securities. The fall of Long Term Capital (1998), changed structured finance from a buy-and-hold to a traded market structure, ending forever the illusion that lagging credit ratings could be valid.
R&R ratings are dynamic. They measure current credit risk and certainty-equivalence value of loan pools and securities through the value chain in real time. Written in Java, all R&R solutions have these properties that reinforce risk reliability and control:
- Authentic ontology: language objects say what they mean, and mean what they say.
- Interoperability: applications communicate easily with each other, and with foreign applications.
- Non-arbitrary process rules: instructions are executed under a comprehensive design.
- Granularity: the measure of value is as small as it needs to be. Arithmetic ensures scalability.
- Real-time feedback: updated information is produced as soon as new data become available.