[R] Probability(Markov chain transition matrix)

[Maria Gu]

Hi all, thank you for the response of my inquiry.
Let me explain more specifically about what I want from R.
It is about estimating bad debt related to people's credit card payment 
behavior.
Here we go!


Status of a credit account {NC, 0,1,2,.....M} where NC is no-credit 
status(account has no balance), 0 is where the account has a credit balance 
but the payment are up to date, 1 is where the account is one payment 
overdue, and M payment overdue is classified as default.

So we come up with Transition matrix stating probabilities of each state

FromTo NC   0       1     2     3
NC      0.79  0.21  0      0    0
0          0.09  0.73 0.18 0    0
1          0.09  0.51  0   0.40  0
2          0.09  0.38  0      0   0.55
3          0.06  0.32  0      0   0.62


Thus if one starts with all the accounts having no credit ?0 =(1,0,0,0,0), 
after one period the distribution of account is ?1=(0.79, 0.21, 0, 0, 0)  
after subsequent periods, it becomes

Ð2=(0.64, 0.32, 0.04, 0, 0),
Ð3= (0.540, 0.387, 0.058, 0.015, 0)
Ð4=(0.468,0.431, 0.070, 0.023, 0.008)
Ð5=(0.417, 0.460, 0.077, 0.028, 0.018)
and ++++
Ð10=(0.315, 0.512, 0.091, 0.036, 0.046)

This proves a way for estimating the amount of bad debt will appear the 
future periods. After 10 periods, it estimates that 4.6%(0.046) of the 
accounts will be bad.

I am sure R can solve this, please help me!

Maria Gu
510-418-1240

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