1. Credit Scoring Models to estimate the probability of default for Corporate, Financial, and Sovereign credits.
2. Industry Benchmark Studies to estimate the probability of default for both Retail and Institutional credits.
3. A rigorous methodology to estimate required loss reserves. (Meets GAAP requirements for segmentation.)
3. A rigorous methodology to estimate Capital at Risk and Risk Adjusted Return on Capital for any segment of the portfolio.
Wall Street North has developed a state of the art Economic Capital modeling methodology that reflects the latest mathematical advances and model design techniques. Our model estimates credit portfolio losses using a C++ program that employs the most up to date technology in the field. Our software instantaneously calculates Capital at Risk and Risk Adjusted Return on Capital for every segment of your portfolio. The software user can select precisely which risks they choose to include in their definition of capital and which percentile of the loss distribution to capture in their definition of capital. In addition, any assumptions within the model can be edited with a simple point and click and all of the numbers within the model are again instantaneously recalculated. Model results can be saved, printed or exported into Excel.
Alternative Credit Portfolio software products typically use Monte Carlo simulations to calculate their Capital at Risk. Unfortunately, Monte Carlo simulations often take one hour or longer to calculate a portfolio loss distribution and the results will contain considerable statistical noise due to the simulation process. In addition, Monte Carlo models are not really suitable for decomposing and allocating the portfolio level capital to individual credit exposures or specific sectors of the portfolio. When running simulations, the dollar amount of capital for each component of the portfolio is unstable and therefore unreliable. In comparison, our methodology can calculate capital precisely and correctly for every credit exposure in the portfolio. Accurately allocating capital to different components of the portfolio is imperative when using a capital model for Risk Adjusted Return on Capital (“RAROC”) analyses. In summary, the WSN Model uses the exact same financial theory as used by popular Monte Carlo based software systems. However, our model is much quicker, more accurate and much better suited to RAROC analyses.
As part of our Economic Capital modeling service, we would assist you in developing your initial assumptions for inputs into the model based on WSN's extensive credit research. In addition, we will update our recommended assumptions each year based on our continuing research. We are also willing to review any in-house data that you have available to help establish your initial assumptions.
Please, contact us to learn about some of the more advanced features of our software than we have disclosed on this website. These include the ability to incorporate more complex correlation assumptions and sophisticated portfolio management tools.
We are confident that we can help you to develop a state of the art Economic Capital Model. Please contact Steve Gordon, Managing Director (203) 569-5005 to find out more about our capabilities.