PT  - JOURNAL ARTICLE
AU  - Sanjiv Ranjan. Das
AU  - Rong Fan
AU  - Gary Geng
TI  - Bayesian Migration in Credit Ratings Based on Probabilities of Default
AID  - 10.3905/jfi.2002.319329
DP  - 2002 Dec 31
TA  - The Journal of Fixed Income
PG  - 17--23
VI  - 12
IP  - 3
4099  - https://pm-research.com/content/12/3/17.short
4100  - https://pm-research.com/content/12/3/17.full
AB  - There is no theoretical or empirical model in the literature that posits a stochastic model of rating changes based directly on the joint process of probabilities of default (PD), although it is natural that ratings should be based on default intensity. The authors propose such a model that is simple and practical to implement. Changes in PDs are related to changes in ratings, and a modified Bayesian model may be used to calibrate the historical time series of PD changes to historical rating transition matrices. Rating agencies could use the model to predicate rating changes based on the stochastic process for probabilities of default.