Fig. 3

This figure presents the cumulative probability of default over a period of 10 years for ratings A, BBB, BB, B estimated at different choice of initial times \(s=0,1,2,3\). Note that the figure is on the log scale. Further, the x-axis depicts the time as \(t=s+h\). These probabilities are estimated under the assumption that there is no age at initial time, which means the firm entered the initial state at time s itself. This figure confirms that the inclusion of time non-homogeneity in the model significantly impacts the default probabilities