Assessing the risk of issuer default: the default risk premium and the rating.

Summary Any investment exposes subscribers to an investment risk that is composed of several different types of default risk, which can be assessed by the market or by rating agencies. The compensating indemnity offered in return for the issuer's default risk is the default risk premium, which when added to the comparable risk-free rate of return (same coupon and maturity), gives the rate of return of the security. The first part of the research focuses on the default premium, which is the first tool that informs the financial community about the default risk of bonds. To answer this question, we proceeded as follows: in a first step, we searched for the parameters that have an influence on the default risk and the corresponding premium from the abundant existing financial literature. Then, in a second step, we proceeded to an empirical study in order to highlight the financial variables (through the ratios) that have an impact on the issuer's default premium The second part focuses on the evaluation of the default risk by the rating agencies, the best known of which are based in the United States because of their experience and credibility. S. A. . These include Moody's and Standard & Poor's. After a descriptive presentation of the rating agencies in France and in the world, we have tried, from an empirical study, to find the variables which are predictive of default, and therefore those which are used by the rating agencies, during the classification of bond securities. Finally, we compared the explanatory variables of default risk taking with those considered during the rating procedure (from the results obtained from the two empirical works) in order to see if the market and the rating agencies have or not the same criteria of evaluation of default risk.