Portfolio Risk Calculator

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About

The Portfolio Risk Calculator (PRC) calculates the default distribution of a portfolio of loans.

Its flexible mathematical framework, a Monte Carlo simulation using a Gaussian copula model, allows for the analysis of a wide variety of loan portfolios across various asset classes and varying degrees of granularity. This includes portfolios of CLOs/SMEs, Project Finance and Trade Finance.

The tool calculates the default and recovery rates for different risk score scenarios / confidence levels which, if the user wishes, can form part of the asset side assumptions of the Cash Flow Simulator.

The portfolio’s asset-by-asset information, including default and recovery assumptions, can be simply uploaded directly on to the user interface or using the provided excel template. After this, the smart user interface validates all the data input to ensure the tool runs correctly. Once the assets have been validated, pre-simulation summary statistics are provided including the WAL and WARF of the portfolio. At this stage, the user can apply PD and RR multipliers to the entire portfolio and also edit the correlation parameters thereby altering the level of stress applied making the tool largely customisable.

After the simulations are complete, the model results and outputs are generated and displayed. The key outputs are the calculated default and recovery rates per risk score scenario / confidence level which can be input directly into the asset side assumptions of the Cash Flow Simulator. Portfolio stratifications and summary statistics are also produced and can be viewed across a series of downloadable slick, customisable charts.

After the simulations are complete, the model results & outputs are generated and displayed. The key outputs are the calculated default and recovery rates per risk score scenario / confidence level which can be input directly into the Cash Flow Simulator. Portfolio stratifications and summary statistics are also produced and can be viewed across a series of slick, customizable charts.

Product Benefits

Various Structured Finance Asset Classes
Flexible framework allows for the analysis of a wide variety of loan portfolios with varying degrees of granularity including portfolios of SMEs, Project Finance and Trade Finance.
Investors
Use this tool in conjunction with the Cash Flow Simulator to run comprehensive end-to-end scenario analysis on Structured Finance investments.
Students & Academic Institutions
Learn how the default distribution of a portfolio of loans is calculated by way of a Monte Carlo simulation, using a Gaussian copula model.
Financial Institutions
Assess and compare the default risk of different outstanding portfolios of loans.