Directional Mobility of Ratings
AbstractIn this paper we describe a method to decompose a well-known measure of debt ratings mobility into it’s directional components. We show, using sovereign debt ratings as an example, that this directional decomposition allows us to better understand the underlying characteristics of debt ratings migration and, for the case of the data set used, that the standard Markov chain model is not homogeneous in either the time or cross-sectional dimensions. We find that the directional decomposition also allows us to sign the change in quality of debt over time and across sub-groups of the population.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp900.
Date of creation: 01 Nov 2007
Date of revision:
Contact details of provider:
Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109
Phone: 734 763-5020
Fax: 734 763 5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
Ratings migration; Mobility; Sovereign debt;
Find related papers by JEL classification:
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-07 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bangia, Anil & Diebold, Francis X. & Kronimus, Andre & Schagen, Christian & Schuermann, Til, 2002.
"Ratings migration and the business cycle, with application to credit portfolio stress testing,"
Journal of Banking & Finance, Elsevier,
Elsevier, vol. 26(2-3), pages 445-474, March.
- Anil Bangia & Francis X. Diebold & Til Schuermann, 2000. "Ratings Migration and the Business Cycle, With Application to Credit Portfolio Stress Testing," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 00-26, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Frydman, Halina & Schuermann, Til, 2008. "Credit rating dynamics and Markov mixture models," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(6), pages 1062-1075, June.
- Wei, Jason Z., 2003. "A multi-factor, credit migration model for sovereign and corporate debts," Journal of International Money and Finance, Elsevier, Elsevier, vol. 22(5), pages 709-735, October.
- Albanese, Claudio & Chen, Oliver X., 2006. "Implied migration rates from credit barrier models," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(2), pages 607-626, February.
- Richard Cantor & Frank Packer, 1996.
"Determinants and impacts of sovereign credit ratings,"
Research Paper, Federal Reserve Bank of New York
9608, Federal Reserve Bank of New York.
- Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Oct, pages 37-53.
- Elena Kalotychou & Ana-Maria Fuertes, 2006.
"On Sovereign Credit Migration: A Study of Alternative Estimators and Rating Dynamics,"
Computing in Economics and Finance 2006, Society for Computational Economics
509, Society for Computational Economics.
- Fuertes, Ana-Maria & Kalotychou, Elena, 2007. "On sovereign credit migration: A study of alternative estimators and rating dynamics," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 51(7), pages 3448-3469, April.
- Geweke, John & Marshall, Robert C & Zarkin, Gary A, 1986. "Mobility Indices in Continuous Time Markov Chains," Econometrica, Econometric Society, Econometric Society, vol. 54(6), pages 1407-23, November.
- Pamela Nickell & William Perraudin & Simone Varotto, 2001.
"Stability of ratings transitions,"
Bank of England working papers, Bank of England
133, Bank of England.
- Shorrocks, A F, 1978. "The Measurement of Mobility," Econometrica, Econometric Society, Econometric Society, vol. 46(5), pages 1013-24, September.
- Yusuf Jafry & Til Schuermann, 2003. "Metrics for Comparing Credit Migration Matrices," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 03-09, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Jarrow, Robert A & Lando, David & Turnbull, Stuart M, 1997. "A Markov Model for the Term Structure of Credit Risk Spreads," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 10(2), pages 481-523.
- Altman, Edward I., 1998. "The importance and subtlety of credit rating migration," Journal of Banking & Finance, Elsevier, Elsevier, vol. 22(10-11), pages 1231-1247, October.
- Shorrocks, A F, 1976. "Income Mobility and the Markov Assumption," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 86(343), pages 566-78, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron).
If references are entirely missing, you can add them using this form.