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Estimating Credit Migration Matrices with Aggregate Data – Bayesian Approach

Author

Listed:
  • Davor Kunovac

    (The Croatian National Bank, Croatia)

Abstract

This paper studies the Gibbs sampler developed in Rodriguez-Yam et al. (2004) that can be used to estimate the parameters of inequality constrained regression. The aim of the paper is twofold. First, to present an efficient estimation methodology that has not yet been utilised in credit risk literature, and second, by using this method to estimate a migration matrix governing the dynamics of loans to corporate sector in Croatia when only aggregate (supervisory) data on bank loans in every rating category is available. The results of the analysis suggest that the Bayesian estimator used in this paper has some important comparative advantages over the estimators previously used in the literature.

Suggested Citation

  • Davor Kunovac, 2011. "Estimating Credit Migration Matrices with Aggregate Data – Bayesian Approach," Working Papers 30, The Croatian National Bank, Croatia.
    • Handle: RePEc:hnb:wpaper:30
    as

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    File URL: http://www.hnb.hr/repec/hnb/wpaper/pdf/w-030.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    credit migration matrices; Bayesian inference; inequality constrained regression; truncated normal vector;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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