In this paper, we present a model to describe the evolution of the yield spread by considering the rating evaluation as the determinant of credit spreads. The underlying rating migration process is assumed to be a non-homogeneous discrete time semi-Markov process. We calculate the total sum of...

This article presents a semi-Markov process based approach to optimally select a portfolio consisting of credit risky bonds. The criteria to optimize the credit portfolio is based on l∞-norm risk measure and the proposed optimization model is formulated as a linear programming problem. The...