The purpose of the current business project is to provide the Roll Rate Analytic System (RRAS) for financial and credit organizations, as well as for the banking institutions. No world-class analogues of this service are available at present time. First, in order to implement such a project, sound mathematical and statistical researches were carried out concerning the credit portfolio behavior of various types, in various macroeconomic environments and countries. A great number of credit portfolios, as well as fundamental processes of their behavior were studied. As a result, the correspondent invariants were identified allowing systematizing and automatizing the data processing methods and, consequently, implement the RRAS.

The RRAS is based on the website. Financial and credit organizations as well as the banking institutions are offered to use this system as a supplementary tool for the credit portfolios management, acquiring detailed analytical data and highly-accurate long-term forecasts of the credit portfolio behavior, charge-offs and changes in reserves. It is assumed that the system shall provide additional options for some clients, including research laboratory, research and forecasting of the world and local economies behavior.

Main applications of the Roll Rate Analytic System

The main application tasks to be solved by the RRAS can be structured under the following subgroups:

Research tasks of the credit portfolio’s historical behavior

  • Qualitative characteristics research
  • Research of the external factors impact
  • Sensitivity research to external factors and control action
  • Building of the functional dependencies of one factors group (parameters) from another (parameters)
  • Pricing optimization

Modelling and forecasting tasks

  • What-if analysis or scenario modelling
  • Charge-offs, reserves and losses forecasting
  • Plan development (incl. Balance, report and added costs)
  • Evaluation and forecasting of the capital adequacy
  • Development of Basel reports
  • Evaluation of credit and market risks
  • Monte Carlo: modelling of the probability processes of the credit portfolio behavior, building of the correspondent distributions
  • Development of the funding plan

Insurance and optimization tasks

  • Solution for the profit maximization task within the particular planning horizon considering credit and market risk limit.
  • Solution for the risk minimization task within the particular planning horizon considering a particular profit level
  • Credit risks hedging
  • Market risks hedging
  • Optimal solutions considering the risks hedging conditions

Data visualization

  • Development of the user-friendly interface providing graphical information and tables
  • Data conversion in the various formats (Excel, Access, PDF, etc.)
  • Providing a standardized report both on common, and user standards
  • System flexibility (users gain an option for system development; new reports and analysis types are generated by the client’s queue)

Macroeconomic researches

  • Research of the macroeconomic performance and crisis
  • Development of the dominant function of external factors and credit portfolio behavior. Main arguments of this function are unemployment, GDP and other macroeconomic figures
  • Interaction of the economies and world crisis development

Marketing research

  • Researches concerning the pricings
  • Optimal price strategies
  • Sales channels research and evaluation of the tendencies for each one, e.g. initial creditworthiness