Setup > Credit >Transition Migration

Transition Matrices: From Migration to Credit Curves

 

 



   

Transition Capabilities

Important Note If you use Transition Probabilities your settings can have a Major impact on the engine's simulations.
If you define a Transition with Migration and no conversion the engine will switch to Markov-Chains.


The Transition Probabilities option in the credit menu provides the necessary tools to select and feed Transition Data into the engine.

The Transition screen includes numerous capabilities:




Transition Module Setup and Configuration

Edit Transition Probabilities

There are different tools that facilitate Editing Transition Data with Point and Click Technology. Once you have edited probabilities, you have 2 choices you can either save a snapshot or save in the repository.

Snapshot:

If you save your data as a snapshot, you will not be able to edit the data again.
This is ideal if you want to test values or want to create a scenario without overriding your templates.

Save in Repository:

You can save one (guest users) or multiple templates into your realm for further retrieval. If you are allowed to save multiple Transitions, you will be propted to enter a Name and a FullName, if not, you will be overriding your default Transition Template.

Import Transition Data from an External System You can import Transition either as a CSV or XML file.

  1. Select Import Data
  2. Enter or Browse for the Full name of the file to import. The full name must include the folder and extension to resolve the data source.
  3. Press Submit.

    RiskServers Customer can import multiple transiitons in one step. 
    If you are using the engine as a guest, and you file contains multiple Transition Matrices, a list-box containing all the possible Transition names will be displayed.

    1. Choose the Name of the Transition you want to import.
    2. Press Submit Again.
    3. You can now edit, Transform or save the data you have imported.

Point and Click Validation and Auto-Correcting Tools

The Transition Module provides Tools to Validate and Auto-Correct data with your Mouse.

Example

Let's assume you believe the AA to BBB state is too high and the AA to HY. (High Yield) Transition Probability is Too Low.
We modify the AA to BBB probability and decide to lower the probability by 0.1%. We change 1.45 % probability to 1.35%

Since the sum of probabilities is not 100%, the module will display an Error of -0.1% (-0.00100)

We double click the From AA To HY cell with the Mouse.
The module will modify automatically the cell so that the sum of all probabilities is valid.
Note
If the value to modify is smaller than the change, the tool will Notmake the change since this would casue a negative probability! The value to modify module will modify automatically the cell so that the sum of all probabilities is valid.

Migration Vs Default Mode.

Transition Matrices offer two different but related models to simulate default.

  1. Migration: The engine simulates a Markov Chain. Transition Probabilities are used to simulate the Parties migrating from one Rating state to another until they hit default or the end of simulation
  2. Transition Matrix to Credit Curve via Marginal Conditional Defaults: The engine converts the Transition Probabilities into credit curves and then simulates according to standard default mode.
 

For more information on Transition Matrices see



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