Method and system for predicting credit ratings transitions
First Claim
1. A method, comprising:
- accessing rating facts about one or more issuers using a computer processor;
receiving information about one or more future paths for a first macroeconomic factor and one or more future paths for a second macroeconomic factor by the computer processor, wherein the first macroeconomic factor is an unemployment rate and the second macroeconomic factor is a high yield spread;
calculating, using the computer processor, one or more probabilities of credit rating transitions between credit rating states for the one or more issuers over a time period by a credit transition model based on the rating facts about the one or more issuers, the one or more future paths for the first macroeconomic factor, and the one or more future paths for the second macroeconomic factor, wherein the credit transition model includes a credit rating state of withdrawal from rating; and
generating outputs from the computer processor based on the one or more probabilities of credit rating transitions from the credit transition model, wherein the outputs are capable of being displayed using a computer system with display.
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Abstract
A system and method is provided for allowing users to create portfolios of issuers and macroeconomic scenarios used to determine pertinent rating facts and future paths of macroeconomic drivers. The system and method use the pertinent rating facts and the future paths of macroeconomic drivers, namely unemployment rates and high yield spreads, as inputs to a Credit Transition Model (CTM). The system and method generate a complete set of rating transitions, including predicting the probability of default, while taking into account withdrawal of issuers to more accurately reflect default rates. The system and method provide users with multiple choices for outputs from the CTM and can easily and quickly generate results from the model.
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Citations
26 Claims
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1. A method, comprising:
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accessing rating facts about one or more issuers using a computer processor; receiving information about one or more future paths for a first macroeconomic factor and one or more future paths for a second macroeconomic factor by the computer processor, wherein the first macroeconomic factor is an unemployment rate and the second macroeconomic factor is a high yield spread; calculating, using the computer processor, one or more probabilities of credit rating transitions between credit rating states for the one or more issuers over a time period by a credit transition model based on the rating facts about the one or more issuers, the one or more future paths for the first macroeconomic factor, and the one or more future paths for the second macroeconomic factor, wherein the credit transition model includes a credit rating state of withdrawal from rating; and generating outputs from the computer processor based on the one or more probabilities of credit rating transitions from the credit transition model, wherein the outputs are capable of being displayed using a computer system with display. - View Dependent Claims (2, 3, 4, 5)
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6. A method, comprising:
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receiving with a computer processor one or more portfolios including information about one or more issuers; receiving with the computer processor one or more macroeconomic scenarios including information about a first macroeconomic factor and receiving one or more macroeconomic scenarios including information about a second macroeconomic factor, wherein the first macroeconomic factor is an unemployment rate and the second macroeconomic factor is a high yield spread; determining, using the computer processor, rating facts about the one or more issuers based on the one or more portfolios; receiving with the computer processor information about one or more future paths for the first macroeconomic factor and one or more future paths for the second macroeconomic factor based on the received one or more macroeconomic scenarios; applying, using the computer processor, a credit transition model using the rating facts about the one or more issuers, the one or more future paths for the first macroeconomic factor, and the one or more future paths for the second macroeconomic factor by the computer processor; calculating, using the computer processor, one or more probabilities of credit rating transitions between credit rating states for the one or more issuers over a time period by the credit transition model based on the rating facts about the one or more issuers, the one or more future paths for the first macroeconomic factor, and the one or more future paths for the second macroeconomic factor, wherein the credit transition model includes a credit rating state for withdrawal from rating; and
generating outputs from the computer processor based on the one or more probabilities of credit rating transitions from the credit transition model, wherein the outputs are capable of being displayed using a computer system with display. - View Dependent Claims (7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22)
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23. A system, comprising:
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a computer, the computer including a portfolio module, a scenario module, a statistical modeling module, and an output module; the portfolio module configured to receive one or more portfolios comprising information about one or more issuers; the scenario module configured to receive one or more macroeconomic scenarios including information about a first macroeconomic factor and receiving one or more macroeconomic scenarios including information about a second macroeconomic factor, wherein the first macroeconomic factor is an unemployment rate and the second macroeconomic factor is a high yield spread; the statistical modeling module configured to determine rating facts about the one or more issuers based on the one or more portfolios, receive information about one or more future paths for the first macroeconomic factor and one or more future paths for the second macroeconomic factor, apply a credit transition model using the rating facts about the one or more issuers, the one or more future paths for the first macroeconomic factor, and the one or more future paths for the second macroeconomic factor; and
calculate one or more probabilities of credit rating transitions between credit rating states of the one or more issuers over a time period by the credit transition model based on the rating facts about the one or more issuers, the one or more future paths for the first macroeconomic factor, and the one or more future paths for the second macroeconomic factor, wherein the credit transition model includes a credit rating state for withdrawal from rating; andthe output module configured to generate outputs based on the one or more probabilities of credit rating transitions from the credit transition model, wherein the outputs are capable of being displayed using a computer system with display.
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24. A method, comprising:
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displaying, using a computer, a portfolio interface for inputting issuer information of issuers; displaying, using the computer, a macroeconomic scenario interface for inputting information about unemployment rates and information about high yield spreads; transmitting from the computer the issuer information, the information about unemployment rates, and the information about high yield spreads to a credit transition model for generating probabilities of credit rating transitions between credit rating states for the issuers over a period of time, the credit transition model including a credit rating state for withdrawal from rating, wherein the credit transition model generates the probabilities of credit rating transitions using the issuer information, the information about unemployment rates, and the information about high yield spreads; receiving by the computer one or more probabilities of credit rating transitions generated from the credit transition model; and displaying, using the computer, outputs of the one or more probabilities of credit rating transitions on the graphical user interface. - View Dependent Claims (25)
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26. A system, comprising:
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a communication terminal, the communication terminal configured (a) to transmit information about one or more issuers, unemployment rates, and high yield spreads to a credit transition model for generating probabilities of credit rating transitions between credit rating states of the issuers over a period of time, the credit transition model including a credit rating state for withdrawal from rating, and (b) to receive one or more probabilities of credit rating transitions generated from the credit transition model, the credit transition model predicting the one or more probabilities using the information about one or more issuers, unemployment rates, and high yield spreads; and a graphical user interface to display the one or more probabilities of credit rating transitions.
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Specification