Weighted Average Rating Factor

Posted in Finance, Accounting and Economics Terms, Total Reads: 1950

Definition: Weighted Average Rating Factor

Weighted Average Rating Factor (WARF) is the average credit rating measured by Moody’s to determine the overall risk of a portfolio of investment.

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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