Say you have in your hand a transition matrix published by Moody, and you also collected the rating information for a sample of bonds, which you use to form your own transition matrix. How can we use our sample to test whether if Moody's transition matrix is correct?
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$\begingroup$ testing with only one sample is somewhat questionable. How much data do you have ? $\endgroup$– ProbilitatorMar 11, 2014 at 16:31
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1$\begingroup$ About 1000 bonds $\endgroup$– Sam LiMar 11, 2014 at 23:23
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1 Answer
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Depending upon how much data you have, you might find Violi (2004) useful.
Nickell et al. (2000), while principally considering time-dependent stability tests, refers a bit to significance testing between the matrices of different agencies and might also provide some insight.
