Migration Analysis of Indian Corporate: Rating-Based Approach

The IUP Journal of Financial Risk Management, Vol. 7, Nos. 1 & 2, pp. 24-34, March & June 2010

Posted: 25 May 2010

See all articles by Richa Verma

Richa Verma

National Institute of Bank Management

Date Written: May 24, 2010

Abstract

Implementation of Basel II has made it compulsory for banks to study the transition and default in their rating grades to judge the quality of their credit portfolio. In the similar direction, the present study is undertaken primarily to view the migration and default rate conditional on rating of the long-term debt issuers and macroeconomic fundamentals for the period from January 1994 to January 2009. The CRISIL’s annual ratings of debts issued by 578 corporate (Manufacturing Companies) formed the basis of the analysis. It is found from the analysis that the least stable retention rate was found in low rating grade issuers. The mortality (default) rate was observed low for high rated issuer and high for low rated ones. The analysis clearly indicates that the ratings transition is cyclical in nature and so the default probability.

Suggested Citation

Verma, Richa, Migration Analysis of Indian Corporate: Rating-Based Approach (May 24, 2010). The IUP Journal of Financial Risk Management, Vol. 7, Nos. 1 & 2, pp. 24-34, March & June 2010, Available at SSRN: https://ssrn.com/abstract=1614695

Richa Verma (Contact Author)

National Institute of Bank Management ( email )

Kondhwe Khurd, NIBM P.O.
Pune, WY Maharashtra 411048
India

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