RT Journal Article SR Electronic T1 Contingent Claims Analysis Applied in Credit Risk Modeling JF The Journal of Fixed Income FD Institutional Investor Journals SP 24 OP 31 DO 10.3905/jfi.2002.319331 VO 12 IS 3 A1 Anne M. Anderson A1 William Maxwell A1 Theodore M.. Barnhill, Jr YR 2002 UL https://pm-research.com/content/12/3/24.abstract AB A fundamental in credit risk analysis is estimation of the probability that fixed-income securities will migrate to different bond rating categories. Unlike historical transition probabilities, several contingent claims credit risk methodologies simulate the value of a firm's assets and/or debt ratio to create bond rating probability distributions. This study tests the validity of using empirically calculated debt ratios to assign bond ratings. The empirical tests provide evidence supporting the use of such methodologies, with some caveats. Debt ratios are industry-specific and time-dependent, so care must be taken in estimating model parameters from historical relationships.