Default of Borrowers

Description

The Default of Borrowers function simulates the default of borrowers.

Using this Function

Syntax

In the Control File, the Default of Borrowers function is called as follows:

CODE

[account] - Default of borrowers list of (customer1, customer2, ..., customerN)
[account] - Default of borrowers list of (customer1, customer2, ..., customerN) with PD in relation to reference rate
[account] - Default of borrowers largest 3 volumes
[account] - Default of borrowers largest 3 volumes with PD in relation to reference rate

Parameters

[account]

Business figure for which the value should be calculated.
This must be contained in the following input data: Input Files | Financial-Data

{list of} (customer1, customer2, ..., customerN)

List of borrowers for which a default is to be simulated.
This parameter can only be specified if the ‘largest n volumes’ parameter is not specified .

{largest} n {volumes}

Number of the largest borrowers for which a default is to be simulated.
This parameter can only be specified if the parameter ‘list of (customer1, customer2, ..., customerN)’ is not specified.
Hint: if only the customer having biggest volume is to be simulated as defaulted, then the following two notations are supported: 'largest volume' or 'largest 1 volume'.

{with PD in relation to} parameter

Optional parameter: specifies whether the defaulted volume should be multiplied by the corresponding probability of default.

If this parameter is specified, the Forecast PD function is called up automatically in order to calculate the probabilities of default of the corresponding borrowers.

Additional required inputs

Customer List

complete customer list including information on residual debt per customer (for details see Input Files | Customer-List)
If the optional parameter ‘with PD’ is specified, the customer list must also contain information on rating/scoring classes per customer.

Historical probabilities of default

If the optional parameter ‘with PD’ is specified, historical probabilities of default must be included in the sheet Input Files | RISK_PARAMETER for all rating/scoring classes of the customer list.

Examples

The examples below are based on the following data:

value of the business figure [10003]: 47,600.00
customer list (ordered decreasingly by ‘Volume’):

Customer	Customer ID	Customer Type	Volume	Rating	Scoring
Customer_123	11000123	bank	3,600.00	AA+
Customer_124	11000124	bank	2,400.00	A
Customer_125	11000125	private	2,200.00		100
Customer_126	11000126	bank	1,800.00	AA-
Customer_127	11000127	private	1,550.00		99
Customer_128	11000128	private	1,250.00		98
...	...	...	...	...	...

Example 1

CODE

[10003] - Default of borrowers list of (Customer_125)

new value of the business figure [10003]: 47,600.00 - 2,200.00 = 45,400.00

Example 2

CODE

[10003] - Default of borrowers largest 4 volumes

new value of the business figure [10003]: 47,600.00 - 3,600.00 - 2,400.00 - 2,200.00 - 1,800.00 = 37,600.00

Example 3

CODE

[10003] - Default of borrowers list of (Customer_123, Customer_126) with PD in relation to reference rate

The Forecast PD function provides the following probabilities of default:

Rating	PD
AA+	2.30%
AA-	2.75%
A	3.30%

new value of the business figure [10003]:
47,600.00 - (3,600.00 * 2.30% + 1,800.00 * 2.75%) = 47,467.70