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Hi, need to submit a 500 words essay on the topic International service2.Credit ratings play a fundamental role in a reduction of the information asymmetry. Such information concerning the value of se
Hi, need to submit a 500 words essay on the topic International service2.
Credit ratings play a fundamental role in a reduction of the information asymmetry. Such information concerning the value of securities or bonds is often a subject to distortion and bias, but the rating portfolio chips in to alleviate the crises.
The information provided for a certain bond or security influences the intensity of participation of its sales and value in the financial markets. For a borrower to qualify in the stage of borrowing, the lender has to reconsider a variety of factors, one of which is credit rating. Third parties also utilize the same analysis to establish the confidence of the bond progress.
Primarily, credit ratings are very essential in reducing such information gap. One has to spot a critical difference between a real borrower and a risk borrower. In this way, credit ratings will come hand in hand with their in-depth information. The information is independent and not subject to bias. Private investors may not keep in close useful trend with the companies that issue the security. Therefore, it is important for an intermediary to come in between the companies giving their results in terms of ratings. The ratings will not only aid in investment portfolios but also in transparency and disclosure of appropriate bonds purchase in the coming days.
Most significantly, credit rating process utilizes the entire firm’s financial data, financial trends, accounting information and other charters to come up with a conclusive information of rating the firm. The evaluation process is rigorous and consumes much time. Those analyzing the data always strike a clear balance in the assessment tools to ensure that there is no one firm that is disadvantaged. The information is also withheld d and not disclosed to other competitive firms, hence high level of confidentiality. With the rigorous process utilized in data collection, analysis and final verification, the
