Utilization of the Markov Chain Model for Credit Rating Migration Analysis

DOI

10.2991/978-94-6239-801-6_55How to use a DOI?

Keywords

Markov Chain Model; Credit Rating; Risk Management

Abstract

Credit rating migration is an important link in financial risk control. Dynamic forecasting is of great significance to investor decision-making and the credit management of financial institutions. The Markov chain model has become an important tool for rating status migration forecasting because it has no aftereffects. This paper takes credit rating migration prediction as the research theme, and uses the rating data of listed companies and bond issuers in the CSMAR credit rating database to establish a Markov chain model for empirical research. Through data cleaning, migration matrix construction, and model prediction using Python, a reasonable migration matrix is obtained, and the model’s accuracy is higher for medium-term and long-term rating prediction. After the robustness test, in which the data, time, and indicators were replaced, the model’s prediction results remain reliable. The Markov chain model established in this paper provides a feasible method for credit rating migration forecasting, which can provide practical reference for investors’ risk avoidance, credit decision-making, and bond pricing of financial institutions, and enriches the quantitative research paradigm in the field of credit risk management.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Download article (PDF)

TY  - CONF
AU  - Shurui Zhang
PY  - 2026
DA  - 2026/10/23
TI  - Utilization of the Markov Chain Model for Credit Rating Migration Analysis
BT  - Proceedings of the 2026 2nd International Conference on Financial Innovation and Marketing Management (FIMM 2026)
PB  - Atlantis Press
SP  - 512
EP  - 520
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-801-6_55
DO  - 10.2991/978-94-6239-801-6_55
ID  - Zhang2026
ER  -