Non-Parametric Analysis of Rating Transition and Default Data

Journal of Investment Management, Vol. 2, No. 2, Second Quarter 2004

Posted: 26 Jul 2004  

Peter Fledelius

Royal&SunAlliance

David Lando

Copenhagen Business School - Department of Finance

Jens Perch Nielsen

City University London - Cass Business School

Abstract

We demonstrate the use of non-parametric intensity estimation - including construction of pointwise confidence sets - for analyzing rating transition data. We find that transition intensities away from the class studied here for illustration strongly depend on the direction of the previous move but that this dependence vanishes after 2-3 years.

Keywords: Credit ratings, transition probabilities, non-Markov effects, non-parametric analysis

JEL Classification: G00

Suggested Citation

Fledelius, Peter and Lando, David and Nielsen, Jens Perch, Non-Parametric Analysis of Rating Transition and Default Data. Journal of Investment Management, Vol. 2, No. 2, Second Quarter 2004. Available at SSRN: https://ssrn.com/abstract=555422

Peter Fledelius (Contact Author)

Royal&SunAlliance ( email )

60 Gammel Kongevej
DK-1790 Copenhagen V
Denmark

David Lando

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark
+45 3815 3600 (Fax)

Jens Perch Nielsen

City University London - Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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