Abstract
This chapter reviews methods that can be used to investigate time homogeneity and Markov behavior of credit migration matrices. These methods might be helpful to examine deviations from these properties but can also be used to compare different rating systems with respect to their migration behavior. Several of the issues raised are also illustrated using empirical examples of an internal rating system as well as a history of Moody's yearly credit migration matrices. Several studies have shown that migration matrices are not homogeneous through time and that also the assumption of first-order. It focuses mainly on credit migration matrices, and provides information on Moody's average one-year transition probabilities for unsecured long-term corporate and sovereign bond ratings for the case of business cycle.
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