Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203221
Authors: 
Máková, Barbora
Year of Publication: 
2019
Series/Report no.: 
IES Working Paper 03/2019
Abstract: 
This study provides new insights into banks' credit risk models by exploring features of their credit risk estimates and assessing practicalities of transition matrix estimation and related assumptions. Using a unique dataset of internal credit risk estimates from twelve global A-IRB banks, covering monthly observations on 20,000 North American and EU large corporates over the 2015-2018 time period, the study empirically tests the widely used assumptions of the Markovian property and time homogeneity at a larger scale than previously documented in the literature. The results show that internal credit risk estimates do not satisfy these assumptions as they show evidence of both path-dependency and time heterogeneity. In addition, contradicting previous findings on credit rating agency data, banks tend to revert their rating actions.
Subjects: 
Risk management
credit risk
transition matrices
JEL: 
C12
G12
G21
G32
Document Type: 
Working Paper

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