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Activity Number:
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26
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Type:
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Contributed
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Date/Time:
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Sunday, August 6, 2006 : 2:00 PM to 3:50 PM
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Sponsor:
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Business and Economics Statistics Section
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| Abstract - #307043 |
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Title:
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Credit Rating Transition of U.S. Corporate Bonds
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Author(s):
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Weijian Liang*+ and Halina Frydman and Stephen Figlewski
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Companies:
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New York University and New York University and New York University
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Address:
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KMEC Suite 8-160, New York, NY, 10012,
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Keywords:
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credit migration ; Cox model ; time-dependent covariate ; macroeconomic variable ; transition history ; hazard rate
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Abstract:
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This research is an extensive study of factors that influence the hazard rate of occurrence of a credit event. Credit events include defaults from different rating categories, and upgrades and downgrades between two different rating categories. We use macroeconomic variables and firm specific variables as covariates in our analysis. The Cox model is employed to estimate the effects of fixed and time-dependent covariates on the hazard rate. The study is based on the corporate credit migration data from Moody's over the period from 1981 to 2002. Our analysis starts with a large number of macroeconomic factors, and for each type of transition (e.g. C to default) selects the model with the relevant subset of macroeconomic variables. Our final models, in addition to a relatively recent rating history of a firm, generally consist of a small subset of macroeconomic variables.
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