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What Type of Risk Is Being Rated When Bond Agencies

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What type of risk is being rated when bond agencies assign ratings to outstanding debt? What are the two main reasons for having bond agencies rate bonds?


Definitions:

Holiday Lighting

The practice of installing lights and other decorative lighting during holidays; not inherently economic but can involve significant expenditure and economic activity.

Negative Externalities

Costs suffered by a third party as a result of an economic transaction.

Government Tax

is a compulsory financial charge or levy imposed by a government on individuals or corporations to fund public expenditures.

Allocation of Resources

The process of distributing available resources among various uses or projects in an effort to achieve strategic goals and efficiency.

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