The Multi-State Latent Factor Intensity Model for Credit Rating Transitions

@inproceedings{Koopman2008TheML,
  title={The Multi-State Latent Factor Intensity Model for Credit Rating Transitions},
  author={Siem Jan Koopman and Andr{\'e} Lucas and Andr{\'e} Monteiro},
  year={2008}
}
A new empirical reduced-form model for credit rating transitions is introduced. It is a parametric intensity-based duration model with multiple states and driven by exogenous covariates and latent dynamic factors. The model has a generalized semi-Markov structure designed to accommodate many of the stylized facts of credit rating migrations. Parameter estimation is based on Monte Carlo maximum likelihood methods for which the details are discussed in this paper. A simulation experiment is… CONTINUE READING
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