%0 Journal Article %A Dror Parnes %T A Density-Dependent Model for Credit Ratings Migration Dynamics %D 2007 %R 10.3905/jfi.2007.688963 %J The Journal of Fixed Income %P 26-37 %V 17 %N 1 %X This study examines an alternative approach for simulating credit ratings migration by associating firm's survivability and transitivity to a valuable economic parameter; the market- density. The article contrasts several known methodologies over the S&P long-term credit ratings from 1985 to 2004, and authenticates that the density-dependent model is the most realistic scheme. The proposed model statistically and economically dominates the homogeneous Markov chain process, the stochastic business-cycles notion, as well as the momentum technique in describing credit rating transitions. Its main advantages rely upon simplicity of deployment, and its improved ability to track observed default patterns.TOPICS: Fixed income and structured finance, simulations, credit risk management %U https://jfi.pm-research.com/content/iijfixinc/17/1/26.full.pdf