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Estimate Transition Probabilities

Estimate change in credit quality, model transition probabilities from credit rating data

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.

Functions

transprob Estimate transition probabilities from credit ratings data
transprobbytotals Estimate transition probabilities using totals structure input
transprobgrouptotals Aggregate credit ratings information into fewer rating categories
transprobprep Preprocess credit ratings data to estimate transition probabilities

Topics

Estimation of Transition Probabilities

Use estimation transition probabilities to evaluate credit migration histories.

Credit Quality Thresholds

Use transition probabilities by transforming them into credit quality thresholds.

Credit Rating by Bagging Decision Trees

This example shows how to build an automated credit rating tool.

Forecasting Corporate Default Rates

This example shows how to build a forecasting model for corporate default rates.

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