Estimating Markov transition matrices using proportions data : an application to credit risk /

Estimating Markov transition matrices using proportions data : an application to credit risk /

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Bibliographic Details
Author / Creator:	Jones, Matthew T., author.
Imprint:	[Washington, D.C.] : International Monetary Fund, Monetary and Financial Systems Dept., ©2005.
Description:	1 online resource (25 pages) : illustrations.
Language:	English
Series:	IMF working paper ; WP/05/219 IMF working paper ; WP/05/219.
Subject:	Markov processes. Credit -- Econometric models. Risk -- Econometric models. Markov Chains Credit -- Econometric models. Markov processes. Risk -- Econometric models.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/12498425

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Other authors / contributors:	International Monetary Fund. Monetary and Financial Systems Department, issuing body.
ISBN:	1283517795 9781283517799 9781451907742 1451907745 1462390188 9781462390182 1452710805 9781452710808 9786613830241 6613830240
Notes:	Includes bibliographical references. English. Print version record.
Summary:	This paper outlines a way to estimate transition matrices for use in credit risk modeling with a decades-old methodology that uses aggregate proportions data. This methodology is ideal for credit-risk applications where there is a paucity of data on changes in credit quality, especially at an aggregate level. Using a generalized least squares variant of the methodology, this paper provides estimates of transition matrices for the United States using both nonperforming loan data and interest coverage data. The methodology can be employed to condition the matrices on economic fundamentals and provide separate transition matrices for expansions and contractions, for example. The transition matrices can also be used as an input into other credit-risk models that use transition matrices as a basic building block.
Other form:	Print version: Jones, Matthew T. Estimating Markov transition matrices using proportions data. [Washington, D.C.] : International Monetary Fund, Monetary and Financial Systems Dept., 2005

Table of Contents:

"Contents"; "I. INTRODUCTION"; "II. CREDIT QUALITY DYNAMICS USING TRANSITION MATRICES"; "III. APPLICATION TO U.S. DATA"; "IV. ADDITIONAL APPLICATIONS"; "V. CONCLUSIONS"; "TECHNICAL APPENDIX"; "REFERENCES"