Investopedia

Notching

Dictionary Says

Definition of 'Notching'

When rating agencies reduce their ratings on structured financial collateral based on ratings from another agency without rating the collateral themselves. Notching arises when collateral, such as mortgage backed securities (MBS), and other asset backed securities (ABS) are included within investment vehicles that are rated, such as collateralized debt obligations (CDOs).
Investopedia Says

Investopedia explains 'Notching'

A study by Greenberg Quinlan Rosner Research in early 2002 found that 67% of senior executives, working in structured finance, oppose the practice of notching, because they feel that it undermines competition. They feel that the two largest rating agencies employ notching to maximize their market share and undermine competition.

Articles Of Interest

  1. Are High-Yield Bonds Too Risky?

    Despite their reputation, the debt securities known as "junk bonds" may actually reduce risk in your portfolio.
  2. Junk Bonds: Everything You Need To Know

    Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.
  3. What You Need To Know About Financial Analysts

    Thinking about relying on analyst recommendations for your next trade? We'll show you what to watch out for.
  4. What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how check the score.
  5. Stock Ratings: The Good, The Bad And The Ugly

    Stock ratings are both loved and reviled. Find out why they deserve equal measures of both.
  6. What does investment grade mean?

    Credit ratings provide a useful measure for comparing fixed-income securities, such as bonds, bills and notes. Most companies are issued a rating based on their financial strength, future prospects ...
  7. Making It Big On Wall Street

    Read about some of the most glamorous Wall Street jobs and what it takes to land one.
  8. 5 ETFs Flaws You Shouldn't Overlook

    Despite their popularity, exchange traded funds have some drawbacks that investors should know about.
  9. Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  10. Liquidity Vs. Solvency

    Learn about the differences between these two words and how each one is used in the stock market.
comments powered by Disqus
Marketplace
Hot Definitions
  1. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
  2. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
  3. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
  4. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.
  5. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.
  6. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.
Trading Center