Capturing Model Risk and Rating Momentum in the Estimation of Probabilities of Default and Credit Rating Migrations

We present two methodologies on the estimation of rating transition probabilities within Markov and non-Markov frameworks. We first estimate a continuous-time Markov chain using discrete (missing) data and derive a simpler expression for the Fisher information matrix, reducing the computational time needed for the Wald confidence interval by a factor of a half. We provide an efficient procedure for transferring such uncertainties from the generator matrix of the Markov chain to the corresponding rating migration probabilities and, crucially, default probabilities. For our second contribution, we assume access to the full (continuous) data set and propose a tractable and parsimonious self-exciting marked point processes model able to capture the non-Markovian effect of rating momentum. Compared to the Markov model, the non-Markov model yields higher probabilities of default in the investment grades, but also lower default probabilities in some speculative grades. Both findings agree with empirical observations and have clear practical implications. We illustrate all methods using data from Moody's proprietary corporate credit ratings data set. Implementations are available in the R package ctmcd.Comment: 22 pages, 5 Figures, 4 Tables. To Appear in Quantitative Financ

Variance component models for survival data

Extensions of the Cox proportional hazards model for survival data are studied where allowance is made for unobserved heterogeneity and for correlation between the life times of several individuals The extended models are frailtymodels inspired by Yashin et al Estimation is carried out using the EM algorithm Inference is discussed and potential applications are outlined in particular to statistical research in human genetics using twin data or adoption data aimed at separating the eects of genetic and environmental factors on mortalit

Magnetic transition in Ni-Pt alloy Systems : Experiment and Theory

We report here the preparation and measurements on the susceptibility, sound velocity and internal friction for Ni-Pt systems. We then compare these experimental results with the first principle theoretical predictions and show that there is reasonable agreement with experiment and theory.Comment: 9 pages, 5 figures. submitted to Journal of Magnetism and Magnetic Material