The Models That the Credit Rating Firms (E

question 45

Multiple Choice

The models that the credit rating firms (e.g.,Moody's,S&P,and Fitch) used to evaluate the risk of the various tranches of MBS debt and thereby assign a credit rating (e.g.AAA,AA-BB,or unrated) were

• A)right on target,but only in the aggregate.
• B)poorly specified.
• C)superfluous,since the CDOs turned out to be backed by the full faith and credit of the U.S.Treasury.
• D)super models,and while as a group they were not so good at evaluating credit risk,they made up for it with their good looks and impeccable fashion sense.

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