Efficient estimation of transition rates between credit ratings from observations at discrete time points

@inproceedings{BladtEfficientEO,
  title={Efficient estimation of transition rates between credit ratings from observations at discrete time points},
  author={Mogens Bladt and Michael W J S\orensen}
}
The paper demonstrates how discrete-time credit rating data (e.g. annual observations) can be analysed by means of a continuous-time Markov model. Two methods for estimating the transition intensities are given: the EM-algorithm and an MCMC approach. The estimated transition intensities can be used to estimate the matrix of probabilities of transitions between all credit ratings, including default probabilities, over any time horizon. Thus the advantages of a continuous-time model can be… CONTINUE READING