Explain the Following Hypothetical Table In This Context, Explain the Concepts of Loan Migration and c

question 43

Essay

Explain the following hypothetical table: $$\begin{array} { | l | c c c c c | } \hline { \begin{array} { l } \text { Risk grade at } \\\text { beginning of } \\\text { year 1 }\end{array} } & { \text { Risk grade at end of year } } \\ &1 & 2 & 3 & 4 & \text { Default } \\\hline 1& 0.86 & 0.08 & 0.03 & 0.02 & 0.01\\\hline 2 & 0.04 & 0.84 & 0.05 & 0.04 & 0.03 \\\hline 3 & 0.02 & 0.08 & 0.81 & 0.05 & 0.04 \\\hline 4 & 0.01&0.03&0.10&0.78&0.08\\\hline\end{array}$$ In this context, explain the concepts of loan migration and migration analysis.

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