the following table is a one year ratings transition matrix given a bond s rating no 598212
The following table is a one-year ratings transition matrix. Given a bond”s rating now, the matrix gives the probability associated with the bond having a given rating in a year”s time. For example, a bond that starts the year with an A rating has a 90% chance of maintaining that rating and an 8% chance of migrating to a B rating. Given a B-rated bond, what is the probability that the bond defaults over one year? What is the probability that the bond defaults over two years?
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To a rating of: |
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A |
B |
CD |
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From a rating of: |
A |
90% |
8% |
2% |
0% |
|
B |
10% |
80% |
8% |
2% |
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C |
0% |
25% |
60% |
15% |
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D |
0% |
0% |
0% |
100% |
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