Financial toolbox/Credit risk utilities/Transprob function/E​xposuretra​nsitions

Is there a possibility in MATLAB to "adapt" transprob function (or if there is another solution) so that it is the percentage of exposure transiting from one rating to another that is the output, and not the number of obligors (in particular time).

Some finance institutions (I guess minority) employ this approach. There can be a large number of defaults from one rating category, but in terms of exposure percentage it may not be that significant (or the other way). How can it be done in MATLAB? Aleksandar

Answer 1

[Michael]

Hi Aleksandar,

This functionality was added to the transprob() function in Financial Toolbox. The transprob() function allows you to pass a column of weights which you can use to pass the exposures for each observation. See this example for the details: Create Exposure-Based Transition Matrix From Historical Data of Credit Ratings with Exposures.