A new approach to testing credit rating of financial debt issuers

T. J. O'Neill, Jack Penm

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

Conventional methods to test for credit ratings of financial debt issuers based on current means of classification are typically undertaken in the framework of applied statistical methods. In this paper, a newly introduced approach, Support Vector Machines (SVMs), has been applied to test a set of Standard & Poor (S&P)'s issuers' credit rating data. The primary purpose of this credit rating analysis is to measure the credit worthiness of credit securities' issuers and thus provide investors valuable information in making financial decisions. To construct our classification model, the ten key financial variables used by S&P's, and a dummy country variable, are used as the input variables. A conventional full-order neural network based classification model is selected as the benchmark. Our findings indicate the superiority of the SVMs approach over the neural network approach.

Original languageEnglish
Pages (from-to)390-401
Number of pages12
JournalInternational Journal of Services and Standards
Volume3
Issue number4
DOIs
Publication statusPublished - 1 Sep 2007
Externally publishedYes

Fingerprint

Support vector machines
Testing
Neural networks
Statistical methods
Debt
Credit rating
Support vector machine
Credit
Financial decision making
Investors
Financial variables
Benchmark

Cite this

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A new approach to testing credit rating of financial debt issuers. / O'Neill, T. J.; Penm, Jack.

In: International Journal of Services and Standards, Vol. 3, No. 4, 01.09.2007, p. 390-401.

Research output: Contribution to journalArticleResearchpeer-review

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