Monteiro, A.

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VU Research PortalThe Dynamics of Corporate Credit Risk: An Intensity-based Econometric AnalysisMonteiro, A.2008Link to publication in VU Research Portalcitation for published version (APA)Monteiro, A. (2008). The Dynamics of Corporate Credit Risk: An Intensity-based Econometric Analysis.General rightsCopyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright ownersand it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights.            • Users may download and print one copy of any publication from the public portal for the purpose of private study or research.            • You may not further distribute the material or use it for any profit-making activity or commercial gain            • You may freely distribute the URL identifying the publication in the public portal ?Take down policyIf you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediatelyand investigate your claim.E-mail address:vuresearchportal.ub@vu.nlDownload date: 22. May. 2021Research SeriesVrije Universiteit AmsterdamAndré António Vaz Pereira Braga MonteiroThe Dynamics of Corporate Credit Risk:An Intensity-based Econometric AnalysisCorporate credit ratings provide a subjective assessment of the defaultprobability incurred by an investor who enters into a long financial positionwith a (rated) corporate counterparty. Ratings play a prominent role in thefinancial industry, as these directly influence the interest rate to be appliedto a specific loan. Additionally, under Basel II, credit ratings are used todetermine the capital buffer to be held by the lender - lower ratings leadingto higher capital buffers. If credit ratings co-vary with the business cycle(at the aggregate level), this has the potential to exacerbate a downturn ofthe economy as the capital becomes increasingly expensive when it is mostneeded. Therefore, obtaining insight into the dynamics of credit ratings isimportant, as these have an indirect impact over the stability of the wholefinancial system. This thesis presents a novel econometric framework foranalyzing and interpreting historical credit rating data that enables theempirical measurement and estimation of both corporate default and ratingtransition probabilities. A major advantage of this modelling framework isthat it allows the extraction of the dynamic aggregate patterns present inrating data without the need to pinpoint their precise determinants.Several new methods for estimating and forecasting the rating transitionmatrix associated with a given rating system are also introduced.André Monteiro (1973) graduated in Applied Mathematics from theUniversity of Porto in 2001. After being responsible for several appliedprojects in statistics at both Interpay Nederland B.V. and Eurostat heenrolled in the M.Phil. program of the Tinbergen Institute in late 2002.In the context of his Ph.D. studies at the Tinbergen Institute he was ableto make a few contributions to the literature dealing with the statisticalanalysis of credit rating data. The main results of his research havebeen published in peer-reviewed scientific journals in the fields ofeconometrics and finance.The Dynamics of Corporate Credit Risk: An Intensity-based Econometric AnalysisAndré Monteiro435

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The Dynamics of Corporate Credit Risk: An Intensity-based Econometric Analysis

DSpace at VU

Research Series
Vrije Universiteit Amsterdam
André António Vaz Pereira Braga Monteiro
The Dynamics of Corporate Credit Risk:
An Intensity-based Econometric Analysis
Corporate credit ratings provide a subjective assessment of the default
probability incurred by an investor who enters into a long financial position
with a (rated) corporate counterparty. Ratings play a prominent role in the
financial industry, as these directly influence the interest rate to be applied
to a specific loan. Additionally, under Basel II, credit ratings are used to
determine the capital buffer to be held by the lender - lower ratings leading
to higher capital buffers. If credit ratings co-vary with the business cycle
(at the aggregate level), this has the potential to exacerbate a downturn of
the economy as the capital becomes increasingly expensive when it is most
needed. Therefore, obtaining insight into the dynamics of credit ratings is
important, as these have an indirect impact over the stability of the whole
financial system. This thesis presents a novel econometric framework for
analyzing and interpreting historical credit rating data that enables the
empirical measurement and estimation of both corporate default and rating
transition probabilities. A major advantage of this modelling framework is
that it allows the extraction of the dynamic aggregate patterns present in
rating data without the need to pinpoint their precise determinants.
Several new methods for estimating and forecasting the rating transition
matrix associated with a given rating system are also introduced.
André Monteiro (1973) graduated in Applied Mathematics from the
University of Porto in 2001. After being responsible for several applied
projects in statistics at both Interpay Nederland B.V. and Eurostat he
enrolled in the M.Phil. program of the Tinbergen Institute in late 2002.
In the context of his Ph.D. studies at the Tinbergen Institute he was able
to make a few contributions to the literature dealing with the statistical
analysis of credit rating data. The main results of his research have
been published in peer-reviewed scientific journals in the fields of
econometrics and finance.
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The dynamics of corporate credit risk: an intensity-based econometric analysis

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The dynamics of corporate credit risk: an intensity-based econometric analysis

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