Identify the extent of credit risk migration
Budget: $10 – $30 USD
The following is a case designed to give you an open-ended opportunity to show a combination of analytical, reasoning and research ability in an analysis that is typical and relevant for a Capital & Risk Analyst.
The exercise input is the provided Access database consisting of two tables showing data about fictional business partners in Nordea’s portfolio and relevant credit risk data – ID, rating, probability of default (PD, defined by rating), loss given default % (LGD), original exposure (on- and off-balance sheet exposures), exposure at default (EAD), risk-weighted assets (RWA), capital requirement (8% x RWA), expected loss (EL defined as EADxPDxLGD), EADxPD and EADxLGD (last two fields are useful for weighted averages).
The purpose of the exercise is to identify the extent of credit risk migration between the two periods– Period1 and Period2 – from the data in the two tables (Specific Business Partners are identified by the field ID). The user has a number of alternatives for defining the migration impact and should provide not only a result in terms of changed risk-weight (RWA/EAD), changed the probability of default and expected loss, but also consider the impact of new and existing customers and describe the impact of defaulted and unrated customers and whether they are relevant to the analysis by considering the effects on PD, RWA and EL. Which customers have increased/decreased capital consumption the most?
The expected output of the analysis is a summary in PowerPoint of approximately 5 slides. The summary should include top lists, graphs, summary data, etc that is relevant in a summary format that could be presented directly to management. Feel free to comment on the methodology in a brief summary and be sure to note any exceptions in the data or summary in a clear and concise manner (i.e. includes X and Y, but not Z or excluding A, B and C).
I need someone to help me through this.
The exercise input is the provided Access database consisting of two tables showing data about fictional business partners in Nordea’s portfolio and relevant credit risk data – ID, rating, probability of default (PD, defined by rating), loss given default % (LGD), original exposure (on- and off-balance sheet exposures), exposure at default (EAD), risk-weighted assets (RWA), capital requirement (8% x RWA), expected loss (EL defined as EADxPDxLGD), EADxPD and EADxLGD (last two fields are useful for weighted averages).
The purpose of the exercise is to identify the extent of credit risk migration between the two periods– Period1 and Period2 – from the data in the two tables (Specific Business Partners are identified by the field ID). The user has a number of alternatives for defining the migration impact and should provide not only a result in terms of changed risk-weight (RWA/EAD), changed the probability of default and expected loss, but also consider the impact of new and existing customers and describe the impact of defaulted and unrated customers and whether they are relevant to the analysis by considering the effects on PD, RWA and EL. Which customers have increased/decreased capital consumption the most?
The expected output of the analysis is a summary in PowerPoint of approximately 5 slides. The summary should include top lists, graphs, summary data, etc that is relevant in a summary format that could be presented directly to management. Feel free to comment on the methodology in a brief summary and be sure to note any exceptions in the data or summary in a clear and concise manner (i.e. includes X and Y, but not Z or excluding A, B and C).
I need someone to help me through this.