Model

Maturity Exogenous Vintage (MEV) model for CECL

MEV model bases on vintage approach to model credit loss for CECL purpose. MEV model adds Macroeconomic sensitivity and portfolio characteristics through exogenous factors. MEV model demonstrates excellent business intuitions and in line with classical loan default analysis; Our MEV model includes the following analysis where applicable:

  • Vintage analysis of portfolio
  • Exogenous variable analysis
  • Macroeconomic variables analysis
  • Factor analysis and principal components of Macroeconomic variables
  • Portfolio characteristic variable analysis
  • Probability of default model
  • Loan utilization analysis and model
  • MEV model – combine above analysis to build CECL loss rate model
  • Reasonable and supportable period analysis
  • Reversion to mean analysis
  • MEV model for CECL
  • Integration with accounting software using any computer language
  • Development of independent CECL reporting system for accounting

PD/LGD/EAD model for CECL

PD/LGD/EAD method follows the approach for stress testing model but adopts it for CECL purpose.

  • PD model
  • LGD model
  • EAD model
  • Integrate PD/LGD/EAD for CECL
  • Integration with accounting software using any computer language
  • Development of independent CECL reporting system for accounting

Lifetime loss rate model for CECL

Lifetime loss rate model for CECL utilizes a direct approach to loss rate estimation. It uses cross sectional panel data to model lifetime loss rate directly. Lifetime loss rate model incorporate both Macroeconomic and portfolio characteristics into the model;

  • Macroeconomic variable analysis
  • Portfolio characteristic variable analysis
  • Lifetime loss rate regression model
  • Reasonable and supportable period analysis
  • Reversion to historical mean analysis
  • Integration with accounting software at any computer language
  • Development of independent CECL reporting system for accounting

Q-factor models for Moody’s analytics

Q-factor models are quantitative methods overlay on Moody’s RiskCalc, CMM and MPA models. Moody’s analytics provide CECL calculation for commercial & industrial loans, commercial mortgage loans and mortgage loans. In some cases, Moody’s models do not fit a bank’s portfolio well. Quantitative Q-factor models add adjusting factors (or multiplies) based on specifics of bank’s portfolio and localized economic factors.

  • Back testing analysis of Moody’s model performance
  • Q-factor overlay models for RiskCalc, CMM and MPA
  • XML API or batch script implementation of Moody’s RiskCalc, CMM and MPA
  • Integration with accounting software using any computer language
  • Development of independent CECL reporting system for accounting