Evidence of non-Markovian behavior in the process of bank rating migrations

Borradores de Economia
Número: 
448
Publicado: 
Clasificación JEL: 
C4, E44, G21, G23, G38
Palabras clave: 
financial institutions, macroeconomic variables, capitalization, supervision

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This paper estimates transition matrices for the ratings on financial insti-tutions, using an unusually informative data set. We show that the process of rating migration exhibits significant non-Markovian behavior, in the sense that the transition intens