MIGRATION MATRICES AND PD PROFILES

MIGRATION MATRICES AND PD PROFILES
One-year migration matrices and long-term PD profiles
MIGRATION MATRICES AND PD PROFILES
One-year migration matrices and long-term PD profiles

 

RSU provides one-year migration matrices and long-term PD profiles for each of its rating systems. A sufficient amount of data is necessary to ensure stable results over time. As market leader for rating systems for wholesale banking RSU has managed to built up a large enough data pool to be able to derive rating migrations from its own models.

 

Scope of application

Rating migrations play a key role in various areas of banking risk management. Year-to-year changes in ratings (one-year migration matrix) are taken into account, for example, in portfolio management whereas long-term migrations and the corresponding PD profiles are inputs for determining standard risk costs and profit margins. With the introduction of IFRS 9, modelling long-term rating migrations has become even more important.

Methodology

RSU provides one-year migration matrices for each module and PD profiles covering at least 30 years for each sub-module. The large data pool and the long time series encompassed by it allow a differentiated and robust estimation of migration matrices and PD profiles for many different segments.
The results of the regular reviews and validations are made available to all clients.

Technology

The one-year migration matrices and the PD profiles are provided within the web-based application PDP Generator. This application offers various customizing options, for example the possibility to aggregate individual PD profiles, apply individual adjustments, or to visually inspect the profiles. The migration matrices and PD profiles can be exported from the application in a standardized Excel format that facilitates the further processing in the institutes’ systems.