Tuesday, November 23, 2010

The Heaven and the Hell

A man, his horse and his dog were traveling down a road. When they were passing by a gigantic tree, a bolt of lightning struck and they all fell dead on the spot.
But the man did not realize that he had already left this world, so he went on walking with his two animals; sometimes the dead take time to understand their new condition…

The journey was very long, uphill, the sun was strong and they were covered in sweat and very thirsty. They were desperately in need of water. At a bend in the road they spotted a magnificent gateway, all in marble, which led to a square paved with blocks of gold and with a fountain in the center that spouted forth crystalline water.
The traveler went up to the man guarding the gate.
“Good morning. What is this beautiful place?”
“This is heaven.”
“How good to have reached heaven, we’re ever so thirsty.”
“You can come in and drink all you want.”
“My horse and my dog are thirsty too.”
“So sorry, but animals aren’t allowed in here.”
The man was very disappointed because his thirst was great, but he could not drink alone; he thanked the man and went on his way. After traveling a lot, they arrived exhausted at a farm whose entrance was marked with an old doorway that opened onto a tree-lined dirt road.

A man was lying down in the shadow of one of the trees, his head covered with a hat, perhaps asleep.
“Good morning,” said the traveler. “We are very thirsty – me, my horse and my dog.”
“There is a spring over in those stones,” said the man, pointing to the spot. “Drink as much as you like.”
The man, the horse and the dog went to the spring and quenched their thirst. Then the traveler went back to thank the man.

“By the way, what’s this place called?”
“Heaven.”
“Heaven? But the guard at the marble gate back there said that was heaven!”
“That’s not heaven, that’s hell.”
The traveler was puzzled.
“You’ve got to stop this! All this false information must cause enormous confusion!”

The man smiled:
“Not at all. As a matter of fact they do us a great favor. Because over there stay all those who are even capable of abandoning their best friends…”

Friday, November 12, 2010

credit rating_7

What are investment and speculative grade ratings?

An investment grade rating signifies the rating agency’s belief that the rated instrument is likely to meet its payment obligations. The debt instruments rated 'BBB' and above are classified as investment grade ratings. Instruments that are rated ‘BB‘ and below are classified as speculative grade category ratings in which case the ability to meet the payment obligations is considered to be “speculative”. Instruments rated in the speculative grade are considered to carry materially higher risk and a higher probability of default compared to instruments rated in the investment grade.

Wednesday, November 03, 2010

credit rating_7

What do the “+” and “-”sign indicate in a rating?



Plus and minus symbols are used to indicate finer distinctions within a rating category. The minus symbol associated with ratings has no negative connotations. In fact, ratings in a higher rating category such as ‘AA-‘ are stronger than ratings in a lower rating category such as ‘A+‘.

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Are rating symbols the same across all types of debt instruments?


No. Rating symbols may vary depending on the type of debt instrument, as for example long term or short term.

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What do the various rating symbols mean?


Each rating symbol is an alphanumeric representation of the degree of repayment risk associated with debt instruments.

Monday, November 01, 2010

credit rating_3

How is credit rating done?


Ratings are based on a comprehensive evaluation of the strengths and weaknesses of the company along with an in-depth study of the industry as well as macro-economic, regulatory and political environment.

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Is a credit rating in the nature of a recommendation?



No, a credit rating is not a recommendation to buy, sell or hold a debt instrument. It is a comment only on the credit risk in an instrument. Rating only provides an additional input to the investor and the investor is required to make his own independent and objective analysis before arriving at an investment decision.