Stability of ratings transitions
The distribution of ratings changes plays a crucial role in many credit risk models. As is well known, these distributions vary across time and different issuer types. Ignoring such dependencies may lead to inaccurate assessments of credit risk. In this paper, a quantification is provided of the dependence of ratings transition probabilities on the industry and domicile of the obligor, and on the stage of the business cycle. The incremental impact of these factors is identified using ordered probit models. This approach gives a clearer picture (than is obtained by comparing transition matrices estimated from different sub-samples) of which conditioning factors are important.
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| Date of creation: | May 2001 |
| Handle: | RePEc:boe:boeewp:133 |
| Contact details of provider: | Postal: Bank of England, Threadneedle Street, London, EC2R 8AH Phone: +44 (0)171 601 4030 Fax: +44 (0)171 601 5196 Web page: http://www.bankofengland.co.uk/ Email: More information through EDIRC
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References listed on IDEAS
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.:
- Jean Helwege & Paul Kleiman, 1996. "Understanding aggregate default rates of high yield bonds," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 2(May).
- Cheung, S., 1996. "Provincial Credit Rating in Canada: An Ordered Probit Analysis," Staff Working Papers 96-6, Bank of Canada.
- Richard Cantor & Frank Packer, 1994. "The credit rating industry," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 1-26.
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