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Markov Chain Transition Probabilities Macro

Posts: 59

Markov Chain Transition Probabilities Macro

Can you help me with the following problem?


I wish to construct a Markov Transition Matrix [ within Credit Risk Roll Rate Analysis ]


Basically the idea is to use empirical customer payment data to estimate the probability of a customer changing

their delinquency state within a unit of time (a month) and to embed this information in a Markov Transition Matrix.


I am looking for a SAS Macro or Program that will enable me to construct the Transition Matrix from the monthly

customer behavioural / payment data.


Possible delinquency states are as follows:


S1:  Performing [ 0 to 5 Days in Arrears ]

S2:  Early Stage Delinquency [ 5 to 30 Days in Arrears ]

S3:  Early Stage Delinquency [ 31 to 59 Days in Arrears ]

S4:  Late Stage Delinquency  [ 60 to 89 Days in Arrears ]

S5:  In Default [ Greater than 89 Days in Arrears ]

S6: Termination of Contract: [ Absorbing State  ? ]

S7: Foreclosure / Repossession [ Absorbing State  ? ]


I would appreciate any suggestions or advice that you are able to provide.



Posts: 4,175

Re: Markov Chain Transition Probabilities Macro

Posted in reply to JonDickens1607

Just to be clear, your goal is to estimate the transition probabilities from data?

Please post example data that shows the structure of your data.

Posts: 59

Re: Markov Chain Transition Probabilities Macro

Thank you for responding to my e-mail

I will construct a sample data set as well as the desired output
after I have sanitised the data set.

I really appreciate your help.


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