Consensus Information and Consensus Rating

Quantifying credit risk with default probabilities is a standard technique for financial institutes, investors or rating agencies. To get a higher precision of default probabilities, one idea is the aggregation of different available ratings (i.e. default probabilities) to a so called ‘consensus rating’. But does the concept of ‘consensus rating’ really make sense? What is a ‘real’ consensus rating? This paper tries to clarify under which conditions a consensus rating exists. Therefore, the term of ‘consensus information’ is used. This leads to a concept that deals with the precision of aggregated rating characteristics. Within this framework the problem of misinformation resp. contradictory information is addressed. It is shown that consensus information is not necessarily more informative than individual information. Furthermore, the aggregation aspects are discussed from a statistical perspective.