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 ...
- 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 ...
- 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 ...
- 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:
...
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 ...
- 26
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