Fig. 4

This figure presents the cumulative default probability over a horizon of 10 years for the credit ratings A, BBB, BB, B when estimated at time \(s=5\) on a log scale. Further, these probabilities are estimated under the assumption that there is some age a at the initial time \(a=1,2,3,4\). More specifically, the firm entered the initial state at time \(s-a\) and continued in the same rating until time s. On the x-axis we measure the time h from which we get \(t=s+h\). This figure confirms that the inclusion of the age process in the model significantly impacts the default probabilities