In banking the default behavior of the counterpart is of interest not only for the pricing of transactions under credit risk but also for the assessment of portfolio credit risk. We develop a test against the hypothesis that default intensities are constant over time within a homogeneous group...

Banks could achieve substantial improvements of their portfolio credit risk assessment by estimating rating transition matrices within a time-continuous Markov model, thereby using continuous-time rating transitions provided by internal rating systems instead of discrete-time rating information....