CECL with MATLAB

Model expected credit loss for CECL with MATLAB

Current expected credit loss (CECL) is a new standard created by the Financial Accounting Standards Board (FASB) for regulating credit loss reporting of financial institutions. It governs balance sheet accounting of loans, mortgages, and other credit instruments and is due to come into force in 2021, primarily affecting U.S. reporting. CECL incorporates a credit impairment charge on affected assets, resulting in higher provisioning expenses.

Expected credit loss (ECL) is a probability-weighted estimate of credit losses during the expected life of a financial instrument. The estimation method requires point-in-time (PIT) projections of probability of default (PD), loss given default (LGD), and exposures at default (EAD). CECL model types available with MATLAB^® include:

Stochastic modeling of default and recovery
Macroeconomic modeling and forecasting
Scenario generation
Instrument pricing and risk sensitivity
Automated reporting, incorporating PIT model and data selection

For more detail on doing CECL with MATLAB, see Risk Management Toolbox™, Statistics and Machine Learning Toolbox™, Econometrics Toolbox™, and MATLAB Report Generator™.

Examples and How To

Modeling Probabilities of Default with Cox Proportional Hazards - Example
Stress Testing of Consumer Credit Default Probabilities - Example
Using MATLAB for Macroeconomic Stress Testing (26:29) - Video
Financial Risk Management Application and Code Examples - Example
Fitting Data with Generalized Linear Models - Example
Forecasting Corporate Default Rates with MATLAB (54:36) - Video
Modeling Correlated Defaults with Copulas - Example

Software Reference

Credit Simulation Using Copulas - Documentation
creditscorecard: Create creditscorecard object - Function
Binning Explorer: Bin data and export into a creditscorecard object - Documentation
Generalized Linear Models - Documentation