Moody’s Investors Service said today that it would be introducing two supplemental measures to its structured finance ratings to enhance their transparency and content.

The new Assumption Volatility Score will assess potential rating volatility based on the uncertainty of rating model assumptions. It will rank transactions on a one-to-five scale by the potential for significant changes owing to uncertainty around the assumptions and the modeling that underlie the ratings. A single V score will apply across tranches to an entire transaction. The V score will be the composite score on factors including historical performance, data adequacy, the complexity and market value sensitivity of a transaction, and governance, Moody’s explained.

The other new metric, Loss Sensitivities, will measure the number of rating notches Moody’s would expect a security to be downgraded should the expected loss rate on its underlying collateral pool increase to a highly stressed level. Specifically, the measure looks at the change in ratings that would follow the expected loss rate on the transaction’s underlying collateral pool increasing to, for example, a 95% loss level stress, that is to a level expected to have a one-in-twenty chance of occurring.

“These two measures will provide more clarity about the credit characteristics of structured finance ratings,” said Michel Madelain, Moody’s chief operating officer. “We believe they will provide investors greater insights into the risks of structured finance products.”

The rating agency said that it developed the measures based on the responses it received to a request for comment issued in February. It received over 200 responses. “In their responses, market participants overwhelmingly rejected the idea of a separate rating scale for structured finance securities,” Moody’s said. “However, they also voiced a desire for more information from Moody’s on key components of structured finance risk. These included the degree of certainty in the assumptions behind a structured finance rating and the sensitivity of a rating to losses in the underlying loan pools.”

Moody’s expects to introduce the measures gradually at the end of the current quarter, using them first on some new securitizations of vehicle-backed assets. Only new issuance will receive the measures.