Point-in-time (PIT) is a technical characterization of a Credit Rating System. Point-in-time ratings aim to evaluate the Credit Risk of a borrower by taking into account both dynamic (volatile, stochastic, cyclical) and permanent (static, slowly varying) characteristics.
Point-in-time ratings react to changes of the borrower's current economic situation one updates rating system inputs to determine the current rating
Issues and Challenges
- While the essence of the point-in-time characterisation is valid, the "cycle" terminology can be misleading, implying regular oscillatory economic dynamics. The ability to identify of a recurrent cycle is neither obvious nor required
- The inclusion of some but not all relevant dynamic information into the rating system produces various hybrids which may have unclear response to changing conditions.
- The inclusion of distinct portfolio segments with differing type of rating systems into the same Rating Scale produces an overall framework with undefined dynamic characteristics