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    MSM Notes PDF

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    Pete Jacopo Belbo Caya

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    © All Rights Reserved
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    MSM Notes PDF

    Uploaded by

    Pete Jacopo Belbo Caya
    92 views2 pages

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    msm notes.pdf

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    92 views2 pages

    MSM Notes PDF

    Uploaded by

    Pete Jacopo Belbo Caya

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Download as pdf
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    Notes on Multi-State Markov Models for Credit Modeling + Finding the Generator Matrix: © Example from Skodebard, David, and Lando: + References Finding the Generator Matrix: ‘Skodeberg, David, and Lando describe a generator matrix as follows: Aun Ana Ann Maa Ana se Ann \Alpha = . Aur Ata Ann The entries of the matrix are generated as follows: Aig > 088 aa = [DA 7 NO Io Yi(s)ds $$ Where: + Y,(s) is the number of observations (e.g. firms, people) in state é at time s: + NN, is the number of transitions in a period between i and j. Example from Skodebard, David, and Lando: Consider the case where we have: + 10 firms in Class A + 10 firms in Class B Aso, let there be another class, D, representing a default In the time span between the present, and 1 year from now, we have the following transitions: + 1 firm in Class A moves to Class B after 1 months. + 1 firm in Class B moves to Class A after 2 months, + 1 firm in class B moves to Class D after 6 months. In this case, the matrix \ Alpha is a 323 matrix. The entries are calculated as followS: References:

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