Workshop objectives and overview
In this workshop, Leigh Baker (RCalc Partners) will first explore the advanced techniques for building high-performing PD, LGD and EAD models. Firms will then learn extensively how to validate these models both from a quantitative and qualitative perspective. In the final step, firms will study how stress testing can be used to understand how credit risk models behave in adverse economic settings.
Delegates at this workshop will get a state of the art overview of credit risk modelling and validation approaches being employed within leading financial institutions.
A sample of the practical learning points for developing your Basel models:
Sampling and Data Preprocessing
• Selecting the sample
• Types of variables
• Missing values: assessing whether random or not
• Outlier detection and treatment (box plots, z-scores, truncation, etc.)
• Exploratory data analysis
• Categorization (chi-squared analysis, odds plots, etc.)
• Weight of evidence (WOE) coding and information value (IV)
• Segmentation
• Reject inference (hard cut-off augmentation, parceling, etc.)
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