Santa Fe, NM 87501
CCAR and DFAST: Reliable knowledge and experience
Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Tests (DFAST)
These two programs were created in response to the 2009 US Financial Crisis and were designed to assure the viability of US banks. Although they cover many aspects of a bank's stability, they are, essentially, about creating stress testing models.
As we were once introduced at a conference, "These guys have been doing stress testing since before stress testing was cool."
We have 20 years of history creating stress test models for retail loans, small business loans, commercial real estate, and deposits.
Stress testing is more than some simple macroeconomic correlations. Loans and deposits have complex dynamics. For loans, balances, attrition / pay-off, defaults, charge-offs and recoveries all depend upon the age of the loans, the underwriting conditions at origination, seasonality, and many other factors in addition to the economic environment. For deposit accounts, new deposits, withdrawals, and renewals exhibit the same structures. Trying to model economic impacts without compensating for these other effects leads to unstable models.
Stress test models are not simple. Any structure left out of a model will be the eventual cause for its failure.
But we've solved this problem. Through hundreds of portfolios, across multiple past recessions we've deployed vintage-aggregate and account-level models for all products and variables.
Our books and articles describe many of these methods, but contact us for a personal discussion of your interests.
Products and ServicesPrescient Models offers the following products and services:
- Software for forecasting and stress testing
- Libraries for in-house software development
- Custom software development
- Validation of client models
- Model documentation
Contact us for a discussion of how we can help.