It is mainly used in Credit Debt Obligations (CDO’s). Every individual asset in the portfolio is considered for calculating weighted average rating factor but the weightage is assigned in the proportion of asset in the portfolio. Moody uses its internal rating assigned to individual assets for calculating weighted average rating factor.
It is very difficult to access the risk associated with the CDO’s and hence the Weighted Average Rating Factor-Warf is the best method to calculate the risk associated with CDO’s.
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