This paper draws a number of conclusions and makes a number of important contributions. First, we determined that the mover-stayer model is better suited than the Markov chain model in estimating the credit risk of loans, according to likelihood ratio statistics. Second, we found that borrowers of investment grades are less likely to remain at their original rating. On the other hand, rating classes had a strong tendency to be downgraded, inferring the likelihood that downgrade momentum is an element of rating behavior. | Assessing the credit risk of bank loans using an extended Markov chain model