PT - JOURNAL ARTICLE AU - Dror Parnes TI - A Density-Dependent Model for Credit Ratings Migration Dynamics AID - 10.3905/jfi.2007.688963 DP - 2007 Jun 30 TA - The Journal of Fixed Income PG - 26--37 VI - 17 IP - 1 4099 - https://pm-research.com/content/17/1/26.short 4100 - https://pm-research.com/content/17/1/26.full AB - This study examines an alternative approach for simulating credit ratings migration by associating firm's survivability and transitivity to a valuable economic parameter; the market- density. The article contrasts several known methodologies over the S&P long-term credit ratings from 1985 to 2004, and authenticates that the density-dependent model is the most realistic scheme. The proposed model statistically and economically dominates the homogeneous Markov chain process, the stochastic business-cycles notion, as well as the momentum technique in describing credit rating transitions. Its main advantages rely upon simplicity of deployment, and its improved ability to track observed default patterns.TOPICS: Fixed income and structured finance, simulations, credit risk management