Rating migration
Movements of issuers between steps of the scale over a period: how many were upgraded, how many downgraded, how many defaulted.
How to read the number
Migration statistics describe not the fate of one issuer but the frequency of outcomes within a group carrying the same grade; expected portfolio losses are built on them.
When the metric lies
Matrices are estimated on past periods, and downgrades cluster in crises. An average taken over calm years understates the risk precisely when it materialises.
Also known as: transition matrix, credit migration