Murphy Choy

Markov Chain

In Uncategorized on June 6, 2011 at 10:19 am

Markov Chain or commonly know to people as transition matrix is one of the key component for credit analysis. In the earliest days of SME credit analysis, MC are the main workhorse to determine whether the credit rating are migrating to poorer ratings.

How do we use it in the determination of performance? This approach has something to do with the inherent nature of all credit rating matrix. MC has an interesting property that allows one to do so. This is done without prior declarations of bad definition as the matrix indicated that various dimensions.

I will release more detail once the research paper is up.

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