Back to Search
Start Over
Traces of business cycles in credit-rating migrations
- Source :
- PLoS ONE, PLoS ONE, Vol 12, Iss 4, p e0175911 (2017)
- Publication Year :
- 2017
- Publisher :
- Public Library of Science, 2017.
-
Abstract
- Using migration data of a rating agency, this paper attempts to quantify the impact of macroeconomic conditions on credit-rating migrations. The migrations are modeled as a coupled Markov chain, where the macroeconomic factors are represented by unobserved tendency variables. In the simplest case, these binary random variables are static and credit-class-specific. A generalization treats tendency variables evolving as a time-homogeneous Markov chain. A more detailed analysis assumes a tendency variable for every combination of a credit class and an industry. The models are tested on a Standard and Poor’s (S&P’s) dataset. Parameters are estimated by the maximum likelihood method. According to the estimates, the investment-grade financial institutions evolve independently of the rest of the economy represented by the data. This might be an evidence of implicit too-big-to-fail bail-out guarantee policies of the regulatory authorities.
- Subjects :
- Financing, Personal
Markov Models
Generalization
Economics
0211 other engineering and technologies
Macroeconomics
lcsh:Medicine
Social Sciences
02 engineering and technology
Markov model
Credit rating
0502 economics and business
Econometrics
Business cycle
Hidden Markov model
lcsh:Science
Probability
Economic History
050208 finance
021103 operations research
Multidisciplinary
Markov chain
05 social sciences
lcsh:R
Commerce
Random Variables
Probability Theory
Probability Distribution
Variable (computer science)
Models, Economic
Money supply and banking
Physical Sciences
lcsh:Q
Business History
Random variable
Finance
Mathematics
Research Article
Subjects
Details
- Language :
- English
- ISSN :
- 19326203
- Volume :
- 12
- Issue :
- 4
- Database :
- OpenAIRE
- Journal :
- PLoS ONE
- Accession number :
- edsair.doi.dedup.....7a87d9a4b701bf8c3e598a7f871cb5cc