What are Some of the Pros and Cons of Loan Level versus Cohort-Level or Portfolio-Level Models for CECL?
In this video, Cris DeRitis reviews the advantages and disadvantages of the different type of models that are acceptable for CECL. A portfolio-level approach is a simpler modeling method, but lacks granularity.
In this video, Cris DeRitis reviews the advantages and disadvantages of the different type of models that are acceptable for CECL. A portfolio-level approach is a simpler modeling method, but lacks granularity. Loan-level models are more granular, but more complex and costly. Vintage cohort-level models are sensitive enough to capture economic changes, but not as complex and costly as loan-level models.
Related Articles
|
Article
Reasonable and Supportable Forecasts - From Principles to PracticeWith many of the larger SEC filers well ahead in their CECL preparations and gearing up for validation, we examine how the requirements of an R&S forecast and reversion may be interpreted. |
|
Article
Defining Economic Scenarios With Constant SeveritiesAlternative economic scenarios are invaluable for quantifying and managing forecast risk. In this article, we define these constant severity scenarios and the models used to estimate their probabilities. |
Moody's Analytics Webinar: Trade War Update - Will Trump Push Too Far?President Trump has escalated the trade war with China, and nearly everyone has been wrong-footed by the move. |
|
Webinar-on-Demand
Trade War Update - Will Trump Push Too Far?President Trump has escalated the trade war with China, and nearly everyone has been wrong-footed by the move. |
|
Presentation
CECL 20/20: A Clear View of the New Credit Loss RequirementsStarting in 2020, the Current Expected Credit Loss (CECL) accounting standard will require financial institutions to reserve for estimated lifetime losses on loans and leases as soon as they are originated. This presentation will provide analytical insight and practical recommendations to help lenders strategize and effectively prepare for the new rule. |
Moody's Analytics Webinar: Briefing on the CCAR ScenariosThe Federal Reserve will release its scenarios for the 2019 CCAR stress test. Join Mark Zandi and Cristian deRitis as they discuss the narratives behind the Fed’s scenarios under forecasts of detailed economic variables. |
|
Webinar-on-Demand
Moody's Analytics Webinar: Briefing on the CCAR ScenariosThe Federal Reserve have released its scenarios for the 2019 CCAR stress test. Listen as Mark Zandi and Cristian deRitis discuss the narratives behind the Fed’s scenarios under forecasts of detailed economic variables. |
Deconstructing Scenario Weights for CECLIn this paper we present the theoretical motivation behind these weights and suggests reasonable ways of choosing these weights in practice. |
|
Article
Gauging CECL CyclicalityIn this paper, we provide empirical support for the conclusion that the CECL standard will be less procyclical than the incurred loss standard. |
|
Article
Mean Reversion in CECL: The What and the HowMean reversion is an important facet of the upcoming Current Expected Credit Loss accounting standard. Under CECL, lenders will need to estimate, and set aside an allowance for, the expected lifetime loss for each loan they book at the time of origination. |
