Measure Rating Transition of Retail Credit Portfolio of Internal Rating-based System

摘要

A time-varying vector autoregressive model, AR(2), is proposed to accommodate business cycle effects and the dominant economy factors. It accord basically with Basel II policies to meet Internal Rating-Based approach. With this model, within-sample test and out-of sample test are carried out with real sequential data from large retail portfolio, for both data set, our empirical findings suggest that outcomes closely resemble observed data.