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2013 | 14 | 1 | 127-136
Article title

APPLICATION OF MIGRATION MATRICES TO RISK EVALUATION AND THEIR IMPACT ON PORTFOLIO VALUE

Content
Title variants
Languages of publication
EN
Abstracts
EN
Migration matrices are widely used in risk management. In particular, quality of financial products due to credit risk is described by assigning them to one of several rating categories. The probability of future rating is determined by a migration matrix. Portfolio’s value depends on the rating and on market states. To find an optimal portfolio one should consider migration matrices and the dynamics of market changes. The main goal of our research was to investigate the impact of both risks, market risk and credit risk on portfolio value. On a real portfolio we show that differences in migration matrices that result from the state of economy influence considerably credit risk and portfolio value.
Year
Volume
14
Issue
1
Pages
127-136
Physical description
Dates
published
2013
Contributors
References
  • Basel Committee on Banking Supervision (2001) The Internal Ratings-Based Approach. Consultative Document.
  • Basel II: Revised international capital framework. http://www.bis.org/publ/bcbsca.htm.
  • Besel III: http://www.bis.org/ bcbs/basel3.htm
  • Bangia A., Diebold F., Schuermann T. (2000) Rating Migration and the Business Cycle with Application to Credit Portfolio Stress Testing, The Wharton Financial Institution,http://www.ssc.upenn.edu/~diebold/index.html
  • Bhatia M., Gupton G., Finger C. (1997) CreditMetricsTM -- Technical Document.
  • Bjoerk T. (2009) Arbitrage Theory in Continuous Time, Oxford University Press.
  • Crouhy M., Galai D., Mark R. (2001) Risk Management, McGraw-Hill, New York.
  • Crouhy M., Jarrow R., Turnbull S. (2008) The Subprime Credit Crisis of 07, http://www.fdic.gov/bank/analytical/cfr/bank_research_conference/annual_8th/Turnbull_Jarrow.pdf
  • Rachev S. T., Trueck S. (2009) Rating Based Modeling of Credit Risk Theory and Application of Migration Matrices, Academic Press.
  • Weron A., Weron R. (1998) Inżynieria finansowa, Wydawnictwo Naukowo Techniczne, Warszawa.
Document Type
Publication order reference
Identifiers
YADDA identifier
bwmeta1.element.desklight-31b38885-59c9-456d-be25-1d4bd72ddef0
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