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Reinventing Retail Lending Analytics - 2nd Impression - Forecasting, Stress Testing, Capital and Scoring for a World of Crises

Edited By Joseph Breeden

Overview

Building on the solid foundation of the previous bestselling first impression, this extended updated impression 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. Reinventing Retail Lending Analytics, Second Impression 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.

The book ends by providing examples of the application of nonlinear decomposition.These examples will provide you with rich data sets for exploring portfolio dynamics and improving portfolio management using nonlinear decomposition techniques.

Publish date: 10 Mar 2014

Availability: In stock

£75.00
OR

Book description

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.

Book details

ISBN
9781782721116
Publish date
10 Mar 2014
Format
Paperback
Size
155mm x 235mm

Editor biography

Joseph Breeden

Joseph L. Breeden is president and chief operating officer of Strategic Analytics Inc. Joseph has spent the past 12 years designing and deploying risk management systems for retail loan portfolios. At Strategic Analytics, which he co-founded in 1999, he leads the design of advanced analytics and takes a leading role working with client institutions. He has personally experienced and created models through the 1995 Mexican peso crisis, the 1997 Asian economic crisis, the 2001 global recession, the 2003 Hong Kong SARS recession, and the 2007 US mortgage debacle. These crises have provided him with a rare perspective on crisis management and the analytics needs of executives for strategic decision-making. Joseph received separate BS degrees in mathematics and physics in 1987 from Indiana University. He earned a PhD in physics in 1991 from the University of Illinois. His thesis work involved real-world applications of chaos theory and genetic algorithms. In the mid-90s, he was a member of the Santa Fe Institute. Since 1987, he has published more than 40 articles in various journals on subjects including portfolio forecasting, economic capital, evolutionary computation, non-linear modeling, astrophysics and nuclear physics.

Table of contents

Foreword

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

Testimonials

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

Customer Reviews

Average customer reviews for Reinventing Retail Lending Analytics - 2nd Impression - Forecasting, Stress Testing, Capital and Scoring for a World of Crises

Could save you a million times the cost of the book

Early responses to the financial crisis have appealed for transparency in risk modeling and a careful examination of the limitations of the models and methodology applied to forecast loan losses. In this comprehensive work Dr. Joseph Breeden has opened a window into the challenges facing retail lenders globally and draws a road map for implementing models that banks can rely on through good and bad times. Using documented case-studies and real world examples with numerous illustrations, Dr. Breeden bridges the gap between those with responsibility for creating complex credit risk models and management's need to understand on an intuitive level how to evaluate and manage risk. This book explores in detail the methodologies that contributed to the crisis and models that worked. Having had the privilege of hearing Dr. Breeden speak on this topic, I appreciate the opportunity to have his wealth of knowledge at my fingertips. This is a book that both managers and analysts should turn to again and again.
Review by Melissa Peterson , 11/03/2014

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