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 twelve 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. The adoption of IFRS 9 has added to the importance of modelling long-term rating migrations.

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 are provided as Excel files, the long-term PD profiles are generated in the web-based application “PDP Generator”. This software offers various customising options, for example the possibility to aggregate or adjust individual PD profiles. The profiles are represented graphically for visual examination. They can be downloaded as Excel files for further processing.