Reinventing Retail Lending Analytics provides a practical guide to retail lending analytics and the risk assessment and risk management involved.
The global economic crisis of 2008-2009 has exposed the frailty of the most common retail lending models. However, contrary to news headlines, not all the models failed during this crisis. 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 securitized pools and implications for Basel II.
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 will show 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.
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