Using a Multivariate Markov Chain Model for Estimating Credit Risk: Evidence from Taiwan

Su-Lien Lu

Advances in Management and Applied Economics, 2012, vol. 2, issue 4, 15

Abstract: Dependence on credit ratings is an important issue for managing credit risk. This paper assesses credit risk using a multivariate Markov chain model that calculates dependence on credit ratings. We demonstrate the practical implementation of the proposed model using the rating data of 15 industries in Taiwan. Finally, our model is able to consider dependence structure to estimate credit risk.

Date: 2012
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