TranMat: Functions to apply to the credit migration or transition...

In dangulod/ECTools: Economic Capital Tools

Usage

mat = read_mat(file = "transition_matrix.xlsx")

read_mat(file = file)

tran(object, horizon = horizon)

abs_pd(object, horizon = horizon)

con_pd(object, horizon = horizon)

cum_pd(object, horizon = horizon)

Arguments

object	TranMat object
horizon	Number of year for the computation

Details

Credit migration, or a transition matrix, indicates changes in the quality of settled credit at a particular company. Transition matrices are the main input in various applications of risk management.

Credit rating is a process where any credit rating observation can form one of several state ratings. In this research, it is assumed that the credit rating process follows the Markov chain process. This means that the probability placed on one state can only be determined by knowing the state from its previous observation. The assumption of Markov chain in the credit rating process implies that the credit transition is more time invariant or time homogenous, where the transition probability remains the same towards time and constant during the predetermined horizon.

Value

readmat reads the matrix from a excel file and puts it in the right format

the function 'tran' compute the transtitio matrix to horizon years

the function 'abs_pd' compute the absolute probability matrix of default to horizon years

the function 'con_pd' compute the conditional probability matrix of default to horizon years

the function 'cum_pd' compute the cumulative probability matrix of default to horizon years

References

http://www.bis.org/ifc/publ/ifcb31u.pdf

Examples

mat = read_mat(file = file)
tran(mat, horizon =  10)
abs_pd(mat, horizon =  10)
con_pd(mat, horizon =  10)
cum_pd(mat, horizon =  10)

dangulod/ECTools documentation built on May 4, 2019, 3:19 p.m.