An assessment of a borrower's creditworthiness, shown on a letter scale, from an agency or the lender's own system. Ratings migrate over time.
Where you will meet it
Credit rating comes up in 10 learning outcome notes across the FRM syllabus.
A few of them:
Banks FRM Part I · Financial markets and products
“The confidence level is chosen to match a target credit rating.”
How Do Firms Manage Financial Risk? FRM Part I · Foundations of risk management
“Appetite is expressed in a statement, for example a target credit rating or a maximum loss at a given confidence level.”
Measuring Credit Risk FRM Part I · Valuation and risk models
“Economic capital is the amount of equity a bank itself judges necessary to absorb unexpected losses over a horizon, normally one year, at a confidence level tied to its target credit rating.”
Capital Structure in Banks FRM Part II · Credit risk measurement and management
“That level is usually tied to a target credit rating, such as 99.9 or 99.97 percent over one year.”
GARP does not endorse, promote, review, or warrant the accuracy of the products or services offered by Charta Learning, nor does it endorse any pass rates claimed by Charta Learning. Further, GARP is not responsible for any fees or costs paid by the user to Charta Learning. FRM® and GARP® are registered trademarks owned by the Global Association of Risk Professionals, Inc. The questions, explanations and study notes are written for this product and are not GARP curriculum material.