Sovereign credit risk assessment with multiple criteria using an outranking method

• Autor(a) principal: Silva, Diogo Ferreira de Lima
• Data de Publicação: 2018
• Outros Autores: Silva, Julio Cezar Soares, Silva, Lucimário Gois de Oliveira, Ferreira, Luciano, Almeida Filho, Adiel Teixeira de
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Institucional da UFRGS
• Texto Completo: http://hdl.handle.net/10183/205170
• topic: Tomada de decisão; Múltiplos critérios; Risco financeiro; Crédito; Administração de empresas

In view of the records of failures in rating agencies’ assessments for sorting countries’ quality of credit in degrees of default risk, this paper proposes a multicriteria sorting model using reference alternatives so as to allocate sovereign credit securities into three categories of risk. From a numerical application, what was observed from the results was a strong adherence of the model in relation to those of the agencies: Standard & Poor's and Moody's. Since the procedure used by the agencies is extremely subjective and often questioned, the contribution of this paper is to put forward the use of an objective and transparent methodology to sort these securities. Given the agencies’ conditions for undertaking the assessment, a complete similarity between the results obtained and the assignments of the agencies was not expected. Therefore, this difference arises from subjective factors that the agencies consider but the proposed model does not. Such subjective and questionable aspects have been partly responsible for the credibility of these credit agencies being diminished, especially after the 2007-2008 crisis.