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Glossary Term: CREDIT MIGRATION

Definition(s) for CREDIT MIGRATION:


1. ) refers to upgrading or worsening in a credit's ranking and credit grade over time. Credit Migration Risk is the risk that a portfolio's credit quality will materially deteriorate over time without allowing a repricing of the constituent loans to compensate the creditor for the now higher default risk being undertaken. Example of credit migration risk in Student Loan Portfolios: When prepayment penalties are not imposed, a long-dated student loan portfolio is exposed to the risk of retaining a greater proportion of poor credits as time unfolds than was anticipated at origination. And because spreads are inflexible after origination, the creditor may no longer be fairly compensated for default risk.



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