# Generalized Linear Mixed Model (GLMM) for the probability of default of corporates

I work in the financial industry and we want to implement an internal rating model for our clients (think corporates large or mid , banks etc. some listed on an exchange some others not).

We want to give ratings (A,B,C etc.) according the probability of default each client will be assigned -say pd's of $$0-0.05$$ goes to credit category A $$0.06-0.1$$ to category B and so on.-

I have studied the literature quite well and my background is qfin and maths.

I ended up thinking that a simple logistic regression is quite good but adding random effects would be interesting since they can capture dependence structures among defaults (i.e. in the firms in the same sector). My data will be financial ratios for each firm for a period of time (say 5-10 years) and if defaulted (1) or not (0) I though of having the financial ratios as fixed effects and the sector and the year as random. Do you think this approach makes sense?

PS i am using R.