In response to additional investor feedback, Moody's Investors Service is modifying the two supplemental measures to its structured finance ratings that it introduced earlier this year. The rating is slightly modifying its terminology for one of the measures, the Assumption Volatility Score while also replacing the second measure, Loss Sensitivity Analysis, with a new measure, Parameter Sensitivity Analyses, to offer investors with more information on the relationship between an assigned rating and the model inputs that contributed to that rating. The firm said the development of its Parameter Sensitivity Analyses is to respond to investor requests for added information regarding the potential sensitivity of the rating agency's ratings to the assumptions made during the rating process. Parameter Sensitivities offer a quantitative calculation of how the initial rating of a security may vary if key assumptions changed.
"Parameter Sensitivities are not intended to measure how the rating of the security might migrate over time," said Structured Finance Chief Credit Officer Nicolas Weill. "Rather, they are designed to show how the initial rating might change if key assumptions were altered." Also, the rating agency will now refer to its Assumption Volatility Score as the Assumption V Score or just V score. The measure is a relative assessment of the quality of available credit information and the potential variability around the various inputs in determining the rating. "V Scores and Parameter Sensitivities seek to address two distinct questions asked by investors: first, what is the degree of uncertainty around the assumptions that underlie our structured ratings?," said Weill."And, second, how sensitive are Moody"s ratings to changes in our key assumptions?"