KTH Matematik  

Matematisk Statistik

Tid: 9 mars 2009 kl 16.15-17.00

Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!

Föredragshållare: Cecilia Pettersson

Titel: Incorporating The State of the Economy in Ratings Migration Forecasting. (Examensarbete – Master thesis)


Credit risk is considered the dominant source of risk in the world of banking and finance and is therefore the attention of both private and public actors. Thus, the need of a method to accurately estimate credit ratings migration probabilities is a necessity, but yet there is none deemed adequate. The aim of this thesis is to propose a proof of concept and suggest a method that—applied on internal rating data—estimates ratings migration probabilities while incorporating the state of the economy.

The field of modelling of ratings migration as currently known is presented, and aspects of importance will be highlighted. Further, the method of discrete-time Maximum Likelihood estimation is proposed and empirically applied with the incorporation of a macro economic variable. As a result, less diagonal-dominant transition matrices that captures generated movements. Thus, the method renders possible stress testing of transition matrices for historical as well as fictive scenarios.

The full report (pdf)

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Sidansvarig: Harald Lang
Uppdaterad: 25/02-2009