Advanced software and analytics

Advanced suite of software and analytics, providing a single integrated architecture for assessing IFRS9/CECL Expected Credit Loss and running Stress Tests

Z-Risk Engine is an advanced software solution designed to accurately project future ECLs for wholesale portfolios. ZRE’s primary advancement is to unlock complex industry and region credit cycles to accurately convert TTC PD, LGD and EAD models into PIT measures. Accurately projecting wholesale credit losses requires PIT measures to be successful and to satisfy IFRS9/CECL and Stress Testing regulations.

The solution is developed in a flexible SAS® architecture that works directly with a bank’s current suite of PD, LGD and EAD models. Dynamic batch processing of loan portfolios in bulk, utilizing detailed credit cycle models updated on a monthly basis, provides the advanced analytics and processing power banks require.  It is available only available from AAA, and at a fraction of the cost of developing these analytics platforms in-house.

Z-Risk Solution provides a single integrated solution that works directly with a bank’s own credit models.


THE SOLUTION SUITE INTEGRATES THREE INTER-CONNECTED MODULES:


ZRE - Point-in-Time (PIT) Module

Batch processing of a bank’s current credit models:

  • integrates with an institution's PD, LGD, EAD models and data
  • utilizes customized credit cycles derived from CreditEdge, Kamakura, internal loss data, or other indicators
  • batch processes all portfolios by facility and borrower
  • provides unconditional lifetime Point-In-Time PDs, LGDs and EADs


ZRE - Expected Credit Loss (ECL) Module

Batch processing of correlated PD, LGD EADs on a forward-looking basis:

  • integrates with ZRE PIT module to calculate Expected Credit Loss (ECL) using an unconditional simulation approach
  • provides lifetime unconditional PIT PD, LGD and EAD term structures
  • provides lifetime unconditional ECL incorporating correlation in PD, LGD and EAD
  • enables Significant Deterioration
  • enables IFRS9/CECL ECL 


ZRE - Scenario Forecasting module (SFM)

Integrates with ZRE PIT module and batch processing of customized macro-factor scenarios:

  • leverages institution's existing macroeconomic forecasting models or ZRE's macroeconomic model
  • provides lifetime conditional PIT PD, LGD and EAD term structures, for range of scenarios
  • provides lifetime conditional ECL incorporating correlation in PD, LGD and EAD, for range of scenarios
  • enables Significant Deterioration
  • enables IFRS9/CECL ECL using limited scenarios and deterministic stress/base case credit losses

Advanced Credit Model Development Services

With over 60 years of advanced credit model development experience, AAA is the only team in the world to successfully receive approval for two Basel 2 Waivers at two global banks. Our research and modelling team provides custom credit model development services focused on commercial and corporate portfolios and including development of PD, LGD and EAD models:

  • commercial, SME, corporates, banks, funds, NBFIs, project finance, sovereigns and sub-sovereigns
  • End-2-End services in data development, model estimation, validation, documentation, presentation and internal and regulatory governance support
  • combines internal and external credit data sources to maximise statistical validity and accuracy while satisfying all Regulatory requirements
  • benchmarking reviews of Basel credit, IFRS9/CECL and Stress Test models
  • re-development of TTC models to convert them to pure PIT calibrated models.