

Fixing the corporate credit ratings system via crowdsourcing - kjhughes
http://shopyield.com/2009/04/crowdsourcing-ratings/

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jwb119
Credit ratings are already crowdsourced by the stock market. This article is
actually talking about crowdsourcing credit rating _models_, which is actually
quite different and may be a good idea. I don't buy all the hype in the
article though..

>Even while Moody’s gave Lehman a clean bill of health, the alternative model
showed the company was basically DOA. Andersen: The Lehman score was the
lowest score we’ve ever seen.

In fact, I can't stand this type of backtesting analysis on credit risk. The
reason that the model works and gives a low rating score is likely that it
places a high value on the factors that caused the current recession, factors
that are not likely to be the cause of the next major correction.

The real genius credit rating models are the ones that are predictive, rather
than reactionary

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kjhughes
The Big Three credit rating agencies (Moody's, S&P and Fitch) have been ripe
for disruption for ages. Something's flagrantly broken when Lehman carries an
A2 rating right up to its bankruptcy filing and AIG's troubles go unnoticed.

Maybe the transparency of open reporting standards (XBRL) and the insights of
crowdsourcing (FreeRisk) can be combined to fix the system.

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zcrar70
I wonder how easily their approach could be gamed by companies trying to
improve their credit rating; presumably, this would be more difficult if there
were several places that the 'crowdsourcing' was taking place?

Also, not to be too facetious, but the guy in the picture looks pretty smug
and self-satisfied, which is a little offputting.

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wolfish
According to the article, freerisk.com is going to be a open data source for
financial data taken from SEC filings. This is great for all types of
fundamental analysis. I wonder why they're focusing so much on credit risk.

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bradgessler
The use of a market system, like Inkling, would be an interesting approach to
corporate credit ratings.

