Siu, Tak-Kuen; Ching, Wai-Ki; Fung, S. Eric; Ng, Michael - In: Quantitative Finance 5 (2005) 6, pp. 543-556
In this paper, we use credibility theory to estimate credit transition matrices in a multivariate Markov chain model for credit rating. A transition matrix is estimated by a linear combination of the prior estimate of the transition matrix and the empirical transition matrix. These estimates can...
