Transition probabilities offer one way to characterize the past
changes in credit quality of obligors (typically firms), and are cardinal
inputs to many risk management applications. Financial Toolbox™ supports
the estimation of transition probabilities using both cohort and duration
(also known as hazard rate or intensity) approaches using
transprob and related functions.
||Estimate transition probabilities from credit ratings data|
||Estimate transition probabilities using totals structure input|
||Aggregate credit ratings information into fewer rating categories|
||Preprocess credit ratings data to estimate transition probabilities|
Use estimation transition probabilities to evaluate credit migration histories.
Use transition probabilities by transforming them into credit quality thresholds.
This example shows how to build an automated credit rating tool.
This example shows how to build a forecasting model for corporate default rates.