The D/U ratio is calculated as the count of rating downgrades over the count of rating upgrades for a lender during a specific period. It captures the assessment of banks’ risk profile, as they assess it with their internal ratings. As such, it is a forward-looking view on banks’ projections of the crisis.
Risk Modeling is more important than ever: Find out what your peers are doing
The world is facing an uncertain time. Economic growth and/or recovery rates are uncertain, default rates are uncertain and the rate of credit losses on those defaults is uncertain.
Even the right way to model these risks is not certain.