Xing, Haipeng; Sun, Ning; Chen, Ying - In: Journal of Banking & Finance 36 (2012) 1, pp. 78-89
In many credit risk and pricing applications, credit transition matrix is modeled by a constant transition probability or generator matrix for Markov processes. Based on empirical evidence, we model rating transition processes as piecewise homogeneous Markov chains with unobserved structural...
