Credit migration risk: Difference between revisions
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imported>Doug Williamson (Create page. Source - ACT Knowledge Hub - https://hub.treasurers.org/ultra-short-duration-bond-funds-the-importance-of-credit/) |
imported>Doug Williamson (Add links.) |
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== See also == | == See also == | ||
* [[Bond]] | |||
* [[Corporate credit ratings: a quick guide]] | * [[Corporate credit ratings: a quick guide]] | ||
* [[Credit]] | * [[Credit]] | ||
Line 34: | Line 35: | ||
* [[Credit risk]] | * [[Credit risk]] | ||
* [[Downgrade]] | * [[Downgrade]] | ||
* [[Duration]] | |||
* [[Investment grade]] | * [[Investment grade]] | ||
* [[Issuer]] | |||
* [[Maturity]] | * [[Maturity]] | ||
* [[Migration]] | |||
* [[Security]] | |||
* [[Systemic risk]] | * [[Systemic risk]] | ||
* [[Toxic]] | * [[Toxic]] | ||
* [[Ultra short duration bond | * [[Ultra short duration bond fund]] (USBF) | ||
* [[Upgrade]] | * [[Upgrade]] | ||
* [[Volatility]] | * [[Volatility]] |
Latest revision as of 07:21, 25 July 2022
Borrowings - securities - bonds - credit ratings - volatility.
Credit migration risk is the risk of adverse effects resulting from a change in a credit rating.
Sometimes abbreviated to migration risk.
- Managing migration risk in ultra short duration bond funds (USBFs)
- "Credit migration risk refers to the risk of a change in credit rating and, given the low default probabilities for investment-grade credit, is considered more important [than default risk] when managing overall volatility in a USBF.
- Aside from systemic risk, the risk of downgrade is one of the main sources of potential credit volatility.
- Key for the treasurer is the focus on the possibility of downgrades that have the potential to introduce volatility, rather than upgrades to credit quality.
- Managing volatility from migration risk, or other sources, is essential in an USBF, which is why many funds have average maturities of less than six months...
- ... as we move down the credit-rating spectrum, typically the probability of credit migration increases and with this, so too the probability of increased volatility.
- This should be managed by having [only] small exposures to lower-quality credit and to individual lower-quality issuers."
- Ultra Short Duration Bond Funds: The importance of credit - ACT Knowledge Hub.
See also
- Bond
- Corporate credit ratings: a quick guide
- Credit
- Credit rating
- Credit Quality Step
- Credit rating agency
- Credit risk
- Downgrade
- Duration
- Investment grade
- Issuer
- Maturity
- Migration
- Security
- Systemic risk
- Toxic
- Ultra short duration bond fund (USBF)
- Upgrade
- Volatility
Other resource
Ultra Short Duration Bond Funds: The importance of credit - ACT Knowledge Hub