Reinventing Retail Lending Analytics

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.