A coupled Markov chain approach to credit risk modeling

David Wozabal and Ronald Hochreiter ()

Journal of Economic Dynamics and Control, 2012, vol. 36, issue 3, 403-415

Abstract: We propose a Markov chain model for credit rating changes. We do not use any distributional assumptions on the asset values of the rated companies but directly model the rating transitions process. The parameters of the model are estimated by a maximum likelihood approach using historical rating transitions and heuristic global optimization techniques.

Keywords: Credit risk; Markov models; Ratings; Conditional value-at-risk; Bond portfolios (search for similar items in EconPapers)
JEL-codes: C14 C44 D81 G01 G11 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: A Coupled Markov Chain Approach to Credit Risk Modeling (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:36:y:2012:i:3:p:403-415

DOI: 10.1016/j.jedc.2011.09.011

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