On migration matrices application for credit risk evaluation and management under the internal ratings-based approach

Noted is that under conditions of unstable global economy the issues of risk quantitative estimation accuracy and reliability and of risk-management as well become more and more relevant. Internal ratings-based approach to credit risk estimation allows to get its' precise values, however the weak point of the method is the necessity of taking into account the procyclicality (economic cycle changes) influence on borrowers solvency, which as a result affects the quality of risk management. A tool based on the theory of continuous-time Markov chains is designed to improve the quality of credit risk estimation and therefore to upgrade risk-management quality.