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Capture The Moment: FirstKnow.It
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| Technology | Our Method | Worldcom |
| www.FirstKnow.It: Ideas |
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Credit risk management means keeping up with the changes in your customers' status as they happen.
Old information means poor decisions and unmanaged risks.
This is a difficult problem even for the major credit agencies. Despite large teams of analysts they find it difficult to keep up with events. The bankruptcy of Worldcom, the largest in US corporate history, demonstrates the point. The company declared itself insolvent on Sunday 21st July 2002. Click here to see the FirstKnow.It analysis of Worldcom. This shows that in early February 2002 the FirstKnow.It model was assigning a 60% one-year default probability to the company, equivalent to a C- rating. At this time, the company was rated A3/BBB+ by Moody's and S&P. On 4th April 2002, Hoenig & Co. posted on its Bloomberg pages an article by FirstKnow.It, titled "www.FirstKnow.It: Worldcom's credit is heavily overated" highlighting the 60% default probability. Click here to see the original article. This article led to Dr Andrew Bagley, Senior Technical Advisor to FirstKnow.It appearing on CNN Financial News, representing FirstKnow.It as the only credit agency to provide timely
warning of the credit risks of Worldcom.
FirstKnow.It uses current and historic share price information to derive expected loss, default probability, credit ratings and the "Equivalent Equity Position" (EEP) of the credit risk. It is widely accepted that share prices give a good real-time assessment of a company's economic prospects. As new information becomes available it is rapidly reflected in the company's share price and FirstKnow.It recalculates its ratings and Equivalent Equity Position (EEP) every day to incorporate the latest share data. Click here for further discussion of FirstKnow.It's methodology.
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