Loan Portfolio Stress Test Analysis

The loan portfolio stress test software application compiles expected and unexpected probability of default (PD) or loss given default (LGD) migration matrices based on the user defined PD and LGD stress scenarios. Expected migration matrices are used to identify changes in loss provisions, while unexpected, but plausible, migration matrices are used to identify economic capital requirements.

The PD and LGD loan portfolio stress test software applications compiles expected and unexpected migration matrices based on the user defined PD and LGD stress scenarios. Expected migration matrices are used to identify changes in loss provisions, while unexpected, but plausible, migration matrices are used to identify economic capital requirements.

The applications assigns an objective PD or LGD rating to each customer or loan prior to an identified stress scenario, and after the application of the stress. The assigned, objective PD or LGD ratings are compared to the “recorded” PD or LGD ratings.

The expected and unexpected PD or LGD migration matrices are summarized by sub-portfolios. Customers or loans can be viewed and reported. A PD or LGD "watch list" can be created and distributed to the assigned loan or relationship officer.