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Business Cycles and Conditional Credit-Rating Migration Matrices

Author

Listed:
  • Dmitri Boreiko

    (Faculty of Economics and Management, Free University of Bozen-Bolzano, Piazza, Università 1, I-39100, Bolzano, Italy)

  • Serguei Kaniovski

    (Austrian Institute for Economic Research (WIFO), Arsenal 20, A-1030 Vienna, Austria)

  • Yuri Kaniovski

    (Faculty of Economics and Management, Free University of Bozen-Bolzano, Piazza, Università 1, I-39100, Bolzano, Italy)

  • Georg Ch. Pflug

    (Department of Statistics and Operations Research, University of Vienna, Oskar Morgenstern Platz 1, A-1090 Vienna, Austria)

Abstract

To quantify the impact of business cycles on the dynamics of credit ratings, conditional migration matrices and probabilities of the corresponding macroeconomic scenarios are estimated. The approach is tested on a Standard and Poor’s (S&P’s) dataset that covers the period from 1991 to 2013. The difference between the conditional probabilities and their unconditional counterparts is evaluated. It is the greatest, up to 300%, for contraction periods and downgrading probabilities.

Suggested Citation

  • Dmitri Boreiko & Serguei Kaniovski & Yuri Kaniovski & Georg Ch. Pflug, 2018. "Business Cycles and Conditional Credit-Rating Migration Matrices," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 8(04), pages 1-19, December.
    • Handle: RePEc:wsi:qjfxxx:v:08:y:2018:i:04:n:s2010139218400050
    DOI: 10.1142/S2010139218400050
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    References listed on IDEAS

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    Cited by:

    1. Puneet Pasricha & Dharmaraja Selvamuthu & Guglielmo D’Amico & Raimondo Manca, 2020. "Portfolio optimization of credit risky bonds: a semi-Markov process approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-14, December.
    2. Camilla Ferretti & Giampaolo Gabbi & Piero Ganugi & Federica Sist & Pietro Vozzella, 2019. "Credit Risk Migration and Economic Cycles," Risks, MDPI, vol. 7(4), pages 1-18, October.
    3. Jeffrey R. Stokes, 2023. "A nonlinear inversion procedure for modeling the effects of economic factors on credit risk migration," Review of Quantitative Finance and Accounting, Springer, vol. 61(3), pages 855-878, October.

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