What's interesting is that Moody's use an Expected Loss approach while Fitch use a default probability method. Setting aside the one notch difference in favour of Fitch, Moody's would normally be expected to produce a higher rating for a non diverse portfolio except where they have applied extreme haircuts to the same underlying GPUs, which we can assume here. All of this is speculation of course.
Yeah that’s an interesting point. Maybe that divergence can be attributed to the immaturity of the market. No one really knows what the obsolescence curves look like for these GPUs, or what their residual values are. I would assume that, as the market matures over time, credit ratings agencies (and others) will acquire more data about how these loans perform, so the agencies’ ratings will converge on each other, for a given facility.
What's interesting is that Moody's use an Expected Loss approach while Fitch use a default probability method. Setting aside the one notch difference in favour of Fitch, Moody's would normally be expected to produce a higher rating for a non diverse portfolio except where they have applied extreme haircuts to the same underlying GPUs, which we can assume here. All of this is speculation of course.
Yeah that’s an interesting point. Maybe that divergence can be attributed to the immaturity of the market. No one really knows what the obsolescence curves look like for these GPUs, or what their residual values are. I would assume that, as the market matures over time, credit ratings agencies (and others) will acquire more data about how these loans perform, so the agencies’ ratings will converge on each other, for a given facility.
Spot on. The RV curves will need plenty more data points and a whole bunch more transparency