Downgrade

Downgrade is a term used to describe a decrease in the rating of a security or other financial instrument. It is usually done by a rating agency such as Standard & Poor’s or Moody’s. A downgrade can have a significant impact on the value of the security or instrument, as it indicates that the issuer is less likely to be able to meet its obligations. It can also affect the cost of borrowing for the issuer, as lenders may require higher interest rates or more collateral.

History of the Term

The term downgrade has been used since the early 1900s, when rating agencies began to assess the creditworthiness of companies and governments. The first rating agency, Poor’s Publishing Company, was founded in 1916. Since then, rating agencies have become an important part of the financial system, providing investors with an independent assessment of the creditworthiness of issuers.

Downgrades are typically issued when a rating agency believes that the issuer is no longer able to meet its obligations. This can be due to a variety of factors, such as a decline in the issuer’s financial performance, a change in the issuer’s business strategy, or a change in the economic environment. Downgrades can also be issued when the issuer fails to meet certain criteria set by the rating agency.

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Summary

Downgrade is a term used to describe a decrease in the rating of a security or other financial instrument. It is usually done by a rating agency such as Standard & Poor’s or Moody’s. A downgrade can have a significant impact on the value of the security or instrument, as it indicates that the issuer is less likely to be able to meet its obligations. For more information about this term, you can visit websites such as Investopedia, The Balance, and Investing.com.

See Also

• Credit Rating
• Credit Risk
• Default Risk
• Rating Agency
• Rating Scale
• Credit Spread
• Credit Default Swap
• Credit Default Index
• Credit Default Swap Spread
• Credit Default Swap Index

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