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Santa Fe, NM 87501




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Retail Lending Globally, 8 Jan 2013

Welcome to 2013. We're starting the year off with a quick update on progress we have made and plans for the future. If any of the topics below are of interest, just let us know to receive more details.

Looking back...

2012 was very kind to Prescient Models. We came in ahead of plan, both in terms of business and research.

We achieved our goals of creating a loan-level modeling technique that can predict probabilities, not just rank orderings, including scoring factors, lifecycle, and macroeconomic environment while addressing the model specification problem inherent in retail lending. All of this can be done with the same computational speed as the old scoring models.

Much of this work will be published in 2013, but the initial outline was presented at the RMA Annual Conference in Dallas in October. The presentation covered (1) the problems with using unemployment data in stress test models, (2) how the model specification problem causes retail lending models to fail, and (3) the best techniques for creating loan-level models to predict probabilities. These slides are available upon request.

We also developed a mean-reverting model that combines point-in-time volatility analysis with through-the-cycle volatility estimates. This gives economic capital estimates both near-term and long-term. We hope to present this model at Edinburgh in August 2013. We hope to see you there!

All of this was in addition to our on-going work research consumer credit cycles, which was published in RMA Journal and very well received.

Lastly, we made great strides in developing a new 3-day training course that covers loan-level forecasting models, portfolio forecasting, stress testing, and economic capital. The course uses extensive examples in R and was very well received. In 2012, we presented in Moscow, Dusseldorf, Abu Dhabi, Philadelphia (with RMA), Kuala Lumpur, Sydney, Singapore (with RMA), and Athens.

Looking forward...

We're excited about 2013 at Prescient Models. New models, new data sets, and planning for the Edinburgh conference on credit risk are creating a good start to the year. Expect to see announcements of the release of new research results and advancements in loan-level models of probability.

We also have plans for more training courses in 2013. We are planning joint courses with RMI in Las Vegas, May 8-10, in Shanghai, June 19-21, and in Singapore late in the year.

We hope to see you somewhere along the path of 2013.

Happy New Year.

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