There are many ways to slice a securitization but only one way to rate it: continuously.
Traditional ratings cover only a limited risk spectrum when the security goes to market. The risk measurement stops after origination.
R&R ratings reflect the evolving credit risk of tranches as new data become available. The computations are based on the data disclosures required by the U.S. Securities & Exchange Commission in Regulation AB1. They are updated every payment period to provide a full picture of security risk and value through time.
Dynamic re-rating is good for the market. Investors benefit from an early warning signal on mispriced and underperforming transactions. Sellers whose assets meet the public performance criteria benefit from upgrade eligibility.
By reducing capital waste, R&R ratings promote capital renewability.