We illustrate how our services relate to the Basel II Capital Requirements Directive here.

SCENARIO ANALYSIS AND STRESS TESTING

Our work from 1988 provided the default data which enabled our hazard rate approach to the predictive modelling of prepayment, default and loss. This is the foundation for our current scenario analysis and stress testing solutions, applicable at individual mortgage account level and used by lenders to support their waiver applications, risk evaluation and portfolio valuations. Within our Credit Data and Risk Modelling discipline we have applied these analyses to develop a desktop mortgage risk assessment model, used at LTV bucket or at overall portfolio level, especially appropriate for Standardised approach lenders. (more about scenario analysis and stress testing and our desktop applications here)

MODEL VALIDATION

Our model validation work is led personally by Dr Satchell and involves a full validation of the rating system. More detail is provided here. We have significant experience in working on low default portfolios and expert judgement models.

LGD DATA

Many lenders lack sufficient historic data to establish “downturn” and “worst case” estimates for comparison with their “long run average” output. We provide LGD data on properties repossessed over the period 1990 to 1995 to benchmark and calibrate lenders’ models for Basel II and other purposes. see more here

PROPERTY REVALUATION

Lenders wishing to measure current LTV, with the accuracy required by the FSA, use the Acadametrics House Prices series based upon our FT House Price Index, which we can uniquely supply with confidence limits. For loans for which no initial property value is available, we use the AVM of our partner, UK Valuation, at the client’s option. Details are provided here.

SENIOR MANAGEMENT UNDERSTANDING

Our substantial study Understanding Downturn Default incorporates a comprehensive commentary and uses our own default data to provide a unique insight into the dynamics and aftermath of the 1989-1991 “worst case” UK housing market recession. It is available for free download from our Senior Management Understanding page (here). Our Satchell Chan Default Forecasts study (see more here) explains our Satchell Chan model which uses CML data to provide forecasts of future default at national level under any macroeconomic scenario and has Pillar 1 and Pillar 2 applications.