What are the Pros and Cons of Single versus Multiple Scenario Use for CECL?
In this video, Cris deRitis discusses how single versus multiple scenarios can impact loss provisions and affect volatility in portfolios. One advantage of a single scenario is the simplicity, but it only provides one number under one scenario which can cause volatility over time.
In this video, Cris deRitis discusses how single versus multiple scenarios can impact loss provisions and affect volatility in portfolios. One advantage of a single scenario is the simplicity, but it only provides one number under one scenario which can cause volatility over time. Using multiple scenarios will be less volatile, but are most costly.
Related Articles
|
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. |
|
Article
CECLnomics and the Promise of Countercyclical Loss AccountingHistorically, accounting regulations have not served as regulatory tools in bank examiners’ toolkits. Economic capital calculations, leverage ratios, and stress tests are used to assess capital adequacy, while the primary purpose of financial statements has been to inform investors of the recent performance |
