3. When default is modelled as an absorbing state, transition matrices should be adjusted to ensure …

When default is modelled as an absorbing state, transition matrices should be adjusted to ensure that this absorbing state does not conflict with internal PD estimates. Similarly, transition matrices where „NR‟ („Not rated‟) or another column is an absorbing state for withdrawn ratings or non-rated exposures can be adjusted. Any such adjustments should be documented, and the impact of the specified adjustment should be included as part of the documentation.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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