Functional Overview

From the average transition matrix, the transition (migration) from a given Rating or Delinquency band to the Default band represents the Probability of Default for that Rating or Delinquency band, for the corresponding period. On projecting this transition matrix year on year, an asset may transition from one grade to another. The probability of transition to default at the end of each year is the Through the Cycle (TTC) Probability of Default (cumulative). When such Probability of default is adjusted for changes in macroeconomic variables, the Probability of Default is Point in Time (PIT).