6 votes
Accepted

Calculation of the Transition matrix for Credit rating

In order to arrive at an (partial) answer, let us assume that annual credit rating transitions form a Markov chain with absorbing default state $D$. Further, let us assume that we have $K$ non-default ...
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  • 5,763
5 votes

Deriving credit spreads or migration matrices from prob of default

You cannot do it. It is an under-determined problem. That is to say, a whole multitude (subspace of $\mathbb{R}^{N\times N}$) of migration matrices will agree with any given table of default ...
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  • 14.4k
4 votes

Deriving credit spreads or migration matrices from prob of default

Actually, there is a practical way to do it. You can use you PoD estimates to assign a credit rating to your securities and then use a published transition matrix for your purposes. Or you can ...
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  • 1,335
2 votes

Fitting transition matrices in R by solving for coefficient

You can do this using the optim function in R. One possible solution is as follows: ...
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1 vote
Accepted

Observed rating migration matrix to derive the generator matrix

In case an answer is still useful for you after 11 months -> No, a generator matrix can be directly derived from observed rating transition data from which a transition probability matrix can be ...
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