Recent content by ibimbo

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    Markov chain calibration to a set of cumulated frequencies.

    hi thanks for helping out! The Default state is absorbing, meaning the prob for a defaulted firm to become good or bad is 0, hence the last row of my transition matrix is [0,0,1]. I was told to find an approximation method, suggesting least squares. However i would not know how to set...
  2. I

    Markov chain calibration to a set of cumulated frequencies.

    Hi, anyone? :(
  3. I

    Markov chain calibration to a set of cumulated frequencies.

    Homework Statement Hi! I have been given such a task: A population of firms can assume three states: good-bad-bankrupt (default) The cumulated frequencies of default (DP) from year 1 to 10 are given. Find an appropriate transition matrix (TM) I'm given a matrix of historical cumulated...