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Some companies publish historic yearly/quarterly transition metrics for credit rating transitions such as the "Credit Rating Transition and Default Study 2021" by Kula and Bourin from Scope Ratings in February 2022.

In this study, Table 6, also shown below, is titled "Average annual transition matrix (31.12.2012 to 31.12.2021 static pool)".

enter image description here

I would like to know what kind of average is typically used in this context. The above document does not seem to provide any insight on this.

Is it, for example, just the equal-weighted arithmetic mean of the yearly historical transition matrices (the simple average of the annual transition matrices for 2012, 2013, ... , 2021) or what?

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    $\begingroup$ Can you pls add more details to your question so that it can still be understood or answered even if the link you have provided gets broken or changed? $\endgroup$
    – Alper
    Jun 17, 2023 at 10:05
  • $\begingroup$ @Alper I have added more information based on your feedback. Please let me know if still unclear. $\endgroup$
    – Bogaso
    Jun 17, 2023 at 11:31
  • $\begingroup$ I don't undertsand the use of the word average here. In a certain number of years (in this case 9 years) certain transitions took place and the number of transitions from a state to another state can be shown in a Transition Matrix. If desired these can be converted to percentages (w/ each row adding to 100%) for readability. That's how trans. mtx. are typically calculated. Why go through an annual averaging process? It seems superfluous. $\endgroup$
    – nbbo2
    Jun 17, 2023 at 16:37

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