Credit Migration Risk¶
One-line definition¶
The risk that an issuer's credit rating changes (upgrade or downgrade) before it defaults or matures, repricing the bond's spread even without a default event.
Why PMs care¶
Most credit losses over a normal holding period come from spread widening after a downgrade, not from actual default — migration risk is the more common, less extreme version of the same underlying credit risk.
Why this isn't implemented in src/pm¶
A real migration-risk model needs a rating transition matrix (a Markov
chain of annual upgrade/downgrade/default probabilities by starting
rating) and a way to reprice the bond in each resulting state — materially
more machinery than the constant-hazard-rate default/recovery model this
repo builds. This page is the conceptual placeholder; default_recovery.md
is the buildable piece.