Defaults and Ratings Changes

The transition matrix below shows the probability of default and credit rating migrations for each credit rating.

Transition matrices can be calculated by observing the historical pattern of rating change and default. They have been published by S&P and Moody's rating agencies.

To read the table, find today's rating on the left and follow along that row to the column that represents the rating at the risk horizon. For instance, the leftmost bottom figure of 0.17% says that there is a 0.17% chance that a

CCC rated credit will migrate to AAA at the end of the year. Observe how the probability of AAA or AA credits defaulting over 1 year is so miniscule, it rounds to 0.

Learn the skills required to excel in data science and data analytics covering R, Python, machine learning, and AI.

Free Guides - Getting Started with R and Python

Enter your name and email address below and we will email you the guides for R programming and Python.

Saylient AI Logo

Take the Next Step in Your Data Career

Join our membership for lifetime unlimited access to all our data analytics and data science learning content and resources.