CFA Level I · CFA Level I Exam · Introduction to Financial Data Science
An analyst receives a dataset in which each observation is a customer's credit rating recorded as AAA, AA, A, BBB, and so on. The analyst needs to classify this data type. The credit ratings are most likely:
Credit ratings are ordinal data. They are categories with a clear ranking from higher to lower credit quality, but the distance between adjacent ratings is not quantified. Nominal data would have no order, and continuous data would be numeric measurements.
- Aordinal dataCorrect
- Bnominal data
- Ccontinuous numerical data
Explanation
Credit ratings are categories that have a meaningful rank order (AAA is better than AA), but the gaps between ratings are not measurable. This makes them ordinal. Nominal data has no ranking, and continuous data is numerical and measurable.
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