Design of Credit Risk Assessment Model by Predicting Credit Rating Transfer Using Markov Chain Process

Subject Areas : Financial engineering

Farid  Heidarifar ¹ (Department of Finance Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran)
Farhad  Hanifi ² (Department of Finance Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran)
gholamreza  zomorodian ³ (Department of Financial Management, central Tehran Branch, Islamic Azad University. Tehran, Iran and member of Modern Financial Risk Research Group)

Received: 2021-10-04 Accepted : 2021-10-30 Published : 2022-06-22

Keywords: Keywords: "Credit risk", "Credit rating", "Financial and non-financial indicators", "data covering analysis", "Markov Chain Process",

Abstract :

In the present study, he presented a statistical sample related to the information of legal and credit customers of Tejarat Bank, accepted in the stock exchange during the years 1398 to 1399. Using factor analysis technique and Delphi method, the variables affecting credit risk were selected and entered into the data envelopment analysis model, and the performance scores of law firms were obtained using them, and then ranked by the Fitch Institute model. Performing and using the results to predict the movement of customers in different groups using the Markov chain process. The results of data envelopment analysis indicate that 7 companies were identified as efficient in the financial approach and 12 companies in the combined approach. The results of the Markov chain show that the average probability of stopping at the current rank in 1400 in the financial condition is 46% and in the combined mode is 53%, the average probability of improving the situation of companies is 23% and the average probability of falling is 20%.