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Hi David,

I'm not sure how to read the transition table in question 28.

The question states:

For a company starting with rating B in year 1, calculate the default (rating D) probability for year 2.

Starting Ending

A B C D

A 0.98 0.02 0.00 0.00

B 0.12 0.86 0.02 0.00

C 0.00 0.05 0.75 0.20

D 0.00 0.00 0.00 1.00

I've also attached a image of the table.

Can you explain how to read the table and what we are trying to find out? David, I think you may have a presented this kind problem somewhere on the site, but I can't seem to find it.

Thanks in advance.

John

I'm not sure how to read the transition table in question 28.

The question states:

For a company starting with rating B in year 1, calculate the default (rating D) probability for year 2.

Starting Ending

A B C D

A 0.98 0.02 0.00 0.00

B 0.12 0.86 0.02 0.00

C 0.00 0.05 0.75 0.20

D 0.00 0.00 0.00 1.00

I've also attached a image of the table.

Can you explain how to read the table and what we are trying to find out? David, I think you may have a presented this kind problem somewhere on the site, but I can't seem to find it.

Thanks in advance.

John

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