Service overview

Funding plan

Figure 4. Match funding illustration

Effective management of loan, market and strategy risks is inseparable from funding strategy. A retail loan business’ development strategy determines future asset structure. And because there are no assets without liabilities, their structure, dynamics and funding plans, too, are affected. The bank now needs to select a funding strategy to go ahead. Most European and US banks use match funding to balance assets and liabilities with their various terms. This strategy called “match funding” is a good protection against interest and liquidity risks. A funding strategy is another way to connect assets and liabilities within a formula, which helps automating plan generation.

Additional RRAS functional tool can forecast term balance, create funding plans and compute liquidity and interest risks consequent to them.



The author presents the methods for studying credit portfolio behavior in the Modeling and Stress-Testing Credit Portfolio Behavior are partly based on so-called “dual time dynamics” method. This work suggests using dual time dynamics not for decomposing scalar values but for decomposing matrices. The author considers a credit portfolio as a process described by a first-order heterogeneous Markov chain. Starting from this premise, the author uses vintage analysis and the theorem of strong convergence of modified fixed-point algorithms to arrive at transition matrix decomposition. This method makes highly accurate forecasts of credit portfolios possible. Reserves can be estimated with excellent precision and relevant values for stress-testing obtained.

In his later article The Theory and practice of Retail Credit the author considers some successful practical applications of his methods described in the article “Credit portfolios behavior modelling and stress-test”.