Dependence on credit ratings is an important issue for managing credit risk. This paper assesses credit risk using a multivariate Markov chain model that calculates dependence on credit ratings. We demonstrate the practical implementation of the proposed model using the rating data of 15...

In this paper, we adopted a continuous-time non-homogeneous mover-stayer model for the measurement of the credit risk associated with bank loans. This model is an extension of a Markov chain model. Furthermore, we extracted the time varying risk premium to convert the mover-stayer model to a...