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Fig. 5 | Financial Innovation

Fig. 5

From: A Markov regenerative process with recurrence time and its application

Fig. 5

This figure presents the average default probabilities over a horizon of 10 years for different rating categories. For each rating category, we have the real probabilities obtained through S&P and the estimated probabilities from four models namely a time-homogeneous SMP, b time non-homogeneous semi-Markov process (NHSMP), c time-homogeneous MRGP, and d time non-homogeneous Markov regenerative process (NHMRGP). It reveals that the average probabilities obtained from NHMRGP are close to the real probabilities, which is further confirmed by a hypothesis test in “Comparison” section

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