From the perspective of and individual investor, what good are bond ratings? and Bond, James Bond, 30 Wellington Square

From the perspective of and individual investor, what good are bond ratings?

Do bond ratings provide any indication of the amount of market risk embedded in a bond? Explain.


Bond best answer:

Answer by nigelyeoman
S and P (standard and poors) Higest is AAA with bonds BB or lower being called junk bonds (high risk of default and higher yield). Moody's similar ratings are Aaa with junk being Ba or lower. They are good in the fact in that if a bond has an exceptional rating you can rely on the fact of the bond being virtually risk free. The problem with relying on the ratings is they dont really encapsulate other factors such as interest rates, coupons, liqudity of bonds and quality. Bond ratings only give a broad indication of risk (default), not an absolute probabilty of default.
Bond ratings do not factor in market risk. only firm specific risk.

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Bond, James Bond, 30 Wellington Square


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The purported home address of the literary James Bond was the first floor, 30 Wellington Square, Chelsea.

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