A Fuzzy Scoring Approach for Moody's Methodology

Asbtract: The rating agencies play a strongly emphasized role in the world economy thanks to their credit ratings. They have called into question after the American subprime crisis of 2008 and also the European sovereign debt crisis. These agencies hide their analytical methods, which put this subject in ambiguity. In this study, we are interested in sovereign rating, more specifically in the rating of countries by the rating agency Moody's which is based on four factors. We propose in particular to use the fuzzy sets theory to model the imprecision related to scoring scales of Moody's methodology. The developed approach is then applied to a diversified sample of 15 countries with different ratings. Based on a comparison between the found results and the ratings provided by Moody's, we conclude that the degree of compatibility between the two methods is important but it exists some differences.