EconStor >
Verein für Socialpolitik >
Jahrestagung des Vereins für Socialpolitik 2011: Die Ordnung der Weltwirtschaft - Lektionen aus der Krise >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/48698
  
Title:Modelling Rating Transitions PDF Logo
Authors:Weißbach, Rafael
Mollenhauer, Thomas
Issue Date:2011
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2011: Die Ordnung der Weltwirtschaft: Lektionen aus der Krise - Session: Interest Rates A16-V2
Abstract:The time-continuous discrete-state Markov process is a model for rating transitions. One parameter, namely the intensity to migrate to an adjacent rating state, implies an ordinal rating to have an intuitive metric. State-specific intensities generalize the state-stationarity. Observing Markov processes from a multiplicative intensity model, the maximum likelihood parameter estimators for both models can be written as a martingale transform of the processes that count transitions between the rating states. A Taylor expansion reveals consistency and asymptotic normality of the parameter estimates, resulting in a chi-square-distributed likelihood ratio of state-stationarity and the state-specific model. This extents to time-stationarity. Simulations contrast the asymptotic results with finite samples. An application to a sufficiently large set of credit rating histories shows that the one-parameter model can be a good starting point.
Subjects:Rating
Metricality
Multiple Markov process
Counting process
Likelihood ratio
JEL:C33
C41
G33
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2011: Die Ordnung der Weltwirtschaft - Lektionen aus der Krise

Files in This Item:
File Description SizeFormat
VfS_2011_pid_486.pdf550.72 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/48698

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.