Reinventing Retail Lending Analytics, Second Impression provides a practical guide to retail lending analytics and the risk assessment and risk management involved.
In response to the global financial crisis of 2008-2009, the US, EU, and other regulators worldwide have aggressively moved to require forward-looking loss forecasting and stress testing models of all lenders, including many who have never before created models. These crises exposed the frailty of many common approaches, but also highlighted which techniques worked.
This book describes the components necessary for creating robust and effective models for portfolio performance diagnostics, forecasting, stress testing and economic capital. These concepts are also extended to account-level scoring to show how to move from simple rank-ordering to scenario-based prediction of default probabilities for individual loans. All retail loan types are considered, including the modeling of securitised pools.
This book describes retail models in simple language yet it goes beyond just describing implementation as the majority of the book is filled with best practices from the author’s 15 years of experience in the industry and a wide range of industry examples. The book shows you the right way to use these models in many specific problem areas, typical results, how best to validate the models and pitfalls to avoid.
This is the only book describing a class of models that worked through the US mortgage crisis, it is the only book that presents models for all retail lending functions that can be integrated across an institution, and it is the only book that captures industry best practices for retail lending. Every retail lending analyst should read this as the textbook for their industry.
- Publish date
- 10 Mar 2014
- 155mm x 235mm
Table of contents
Daniel Rösch and Harald Scheule
Chapter 1 - Starting at the Top
Chapter 2 - Setting Up the Problem
Chapter 3 - Considering Multiple Vintages
Chapter 4 - Curve Taxonomy
Chapter 5 - Scenario-Based Forecasting
Chapter 6 - Stress Testing
Chapter 7 - Volatility Analysis and Economic Capital
Chapter 8 - Portfolio Optimization
Chapter 9 - Credit Scores and Account Management
Chapter 10 - Analysis of the US Mortgage Crisis
Chapter 11 - An example using SETI@home data
Chapter 12 - Examples of modelling vintages
Epilogue: It’s About Time
’A more timely book could not be written - Reinventing Retail Lending Analytics walks through the various issues of retail lending and develops approaches to address the interaction between economic cycles and retail lending. The complexity of time is extensively explored: vintages, current time and maturity. The book covers complex issues such as scenario based forecasting, stress testing, volatility analysis, economic capital and portfolio optimisation, credit scoring and last, but not least, model risk. It is complemented by an enormous amount of practical as well as academic experience, current information as well as case studies. We are sure this book will contribute to the restoration of financial markets, institutions and instruments. Hence, Joe, a long-term risk expert has to be commended for his achievement in writing such a book during such challenging times.’
Daniel Rösch, Unniversität Hannover and Harald Scheule, University of Melbourne