Credit · Core
Credit Rating
A credit rating is an agency’s opinion of relative default risk — a letter grade that gates mandates, not a market price.
Definition
S&P, Moody’s, and Fitch map issuers and issues into scales (AAA to D). Ratings are through-the-cycle-ish opinions, lagging the tape, and paid for by issuers in the usual model. Markets trade through them every day.
Why it matters
Indexes, Basel, and insurance capital still use the letter. A downgrade can be a bigger flow than the fundamental news.
Case
A name trades at CCC spreads while still rated BB. The market has already downgraded; the committee has not.
How to read it
Use ratings as a constraint map. Price the curve yourself. Watch outlooks and fallen-angel distance.
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