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Determining a credit transition matrix from cumulative default probabilities
Henryk Gzyl / Silvia Mayoral
convex optimization / credit riskResource overview

Determining a credit transition matrix from cumulative default probabilities

Paper2025

by Henryk Gzyl, Silvia Mayoral

Tags
convex optimizationcredit risknumerical methodsoptimization

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Suggested foundations for credit and counterparty risk and optimisation and numerical methods. Specialist prerequisites vary by paper.

Before you read

  1. Credit Instruments, PD/LGD/EAD, and Rating Migration

    Separate default probability, loss severity and exposure.

  2. Conditional Expectation

    Read conditional default and exposure quantities.

  3. Vectors, Matrices and Linear Systems

    Read the linear algebra used to define a numerical problem.

  4. Constrained and Convex Optimisation

    Identify the objective, constraints and conditions for an optimum.

Go further

  1. Threshold Models and the Gaussian Copula for Portfolio Default

    Study dependence between defaults.

  2. CVA and DVA

    Connect exposure and counterparty losses to valuation adjustments.

  3. Calibration as an Inverse Problem

    Understand identifiability and fitted model parameters.

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Explore Counterparty Credit Risk and CVA Explore Linear Algebra, Optimisation and Numerical Methods

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