Credit Rating Transition Matrix

Estimating Credit Rating Transition Matrices Based on Historical Ratings

• The purpose of the model is assessing the probabilities of rating transitions based on a sample of historical credit ratings. Based on historical credit ratings per name, the transition matrix identifies the probability that the credit rating decreases or increases by x notches ;
• Making strong assumptions, it is also possible to derive from the 1-year matrix a multi-period transition matrix ;
• A brief methodology is available in the spreadsheet.