Estimation, Adjustment and Application of Transition Matrices in Credit Risk Models

Stefan Trück () and Emrah Özturkmen
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Stefan Trück: Universität Karlsruhe (TH), Institut für Statistik und Mathematische Wirtschaftstheorie
Emrah Özturkmen: Universität Karlsruhe (TH), Institut für Statistik und Mathematische Wirtschaftstheorie

Chapter 11 in Handbook of Computational and Numerical Methods in Finance, 2004, pp 373-402 from Springer

Abstract: Abstract The paper gives a survey on recent developments on the use of numerical methods in rating based Credit Risk Models. Generally such models use transition matrices to describe probabilities from moving from one rating state to the other and to calculate Value-at-Risk figures for portfolios. We show how numerical methods can be used to find so-called true generator matrices in the continuous-time approach, adjust transition matrices or estimate confidence bounds for default and transition probabilities.

Keywords: Transition Matrix; Generator Matrix; Credit Risk; Transition Matrice; Martingale Measure (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-0-8176-8180-7_11

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DOI: 10.1007/978-0-8176-8180-7_11

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