Meaning of Rating Evidence

Deciding on investment and financing means choosing between alternatives. Every investment and financing decision is a choice between alternatives. There are worse alternatives, better ones or equally good or equally bad ones. The classification of the decision options we call rating.

One focus of our work is on credit ratings. The credit rating we record is an opinion on the economic ability, legal obligation and willingness of an economic entity to meet its payment obligations in full and on time in the long term. The judgment is expressed in terms of scales and symbols commonly used internationally and in the financial systems of more than 110 countries in the world.

RATING EVIDENCE does not award ratings according to idiosyncratic criteria and is not a rating agency, but instead started in 2004 to research evidence-based ratings. In particular, this includes information from the following sources: rating agencies, banks, credit insurers, credit bureaus, research firms, analysts as well as the rated organization itself.

As market economies face a greater or lesser risk of default, all market participants have a priori probabilities of default and bankruptcy. These a-priori probabilities can be corrected upwards or downwards by taking data from the above-mentioned sources and mapped onto generally accepted rating scales. Depending on the evidential value of the data collected, the rating thus determined results in varying levels of evidence, which are expressed by RATING EVIDENCE on the basis of a percentage (0% for no to 100% for complete evidence).

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