Quantitative Research Webinar Series: Multi-Period Credit Risk and Capital Planning with Proxy Functions
Financial institutions are seeking ways to gain a better understanding of their credit portfolios’ risk dynamics, allowing them to foresee and to prepare for potential increases in capital requirements resulting from economic shocks.
Aubrey Clayton, Associate Director, and Xuan Liang, Assistant Director of Portfolio Research at Moody’s Analytics, will discuss how to leverage a multi-period capital planning framework to determine the appropriate capital buffer level for a portfolio under various economic scenarios and how to fortify capital buffers through portfolio selection across periods of macroeconomic stress.
Webinar Highlights:
Overview of Multi-Period Capital AnalysisBrute Force Approach
Proxy Function Approach
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Multi-Period Capital Planning
This paper proposes and illustrates a multi-period capital planning framework that can be used to calculate a portfolio's capital requirement over time and to determine the appropriate capital buffer level under various economic scenarios. Such analysis can help financial institutions gain a better understanding of credit portfolios' risk dynamics, allowing them to foresee and to prepare for potential increases in capital requirements resulting from economic shocks.
