This paper studies the reactions of Credit Default Swap (CDS) to rating announcements. Credit rating agencies make multiple announcements, some of which are intended to reflect the latest information available about a firm and others to provide a stable signal of credit quality. Applying event study methodology to data on CDS, we examine whether these markets respond to rating announcements. Since CDS quotes are considered the market price of credit risk, we assume they should show prompt reactions to the changes in credit quality of the reference firm. The aim of the paper is to show how the CDS market may provide timely signs of increased credit risk and may represent a crucial tool for risk measurement and management.