The Analytical Cooperative

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Probability of Default (PD) & Loss Given Default (LGD) Methodologies

Our PD & LGD solutions are driven by methodological frameworks for evaluating the credit risk (typically) of low-data sectors such as banks, insurers, sovereigns, specialised finance classes and corporates.

At the AC we recognise that quantitative analysis and expert judgement are two sides of the same coin. Our scoring models and surrounding processes are therefore built in a manner that incorporates the benefits of both. The AC associates have unique, tried and tested experience in developing and implementing credit risk frameworks across the globe.

Off-the-shelf

For those clients requiring a pre-built methodology for selected sectors, the AC can supply a wide-range of methodologies “off the shelf”. Methodologies are designed in a highly modularised format, so clients can easily select a combination of modules that best suits their unique needs. Moreover, as those needs change over time our clients can fine-tune their requirements accordingly.

At the AC we believe that most attention should be focused on those risks which potentially represent the largest credit exposures. Therefore the analysis and surveillance of those obligors requires in-depth and detailed scrutiny while other obligors perhaps warrant a somewhat lighter touch. Equally we recognise that the availability of financial and non-financial data to perform an analysis can vary widely between different exposures. Our solutions therefore contain module variants that require varying levels of data input (to assess the same risk) but which nevertheless are conceptually and analytically compatible.

Customised

Some clients prefer a solution that is fully customised to specific requirements. The Analytical Cooperative has extensive experience of such customisation. In contrast to some firms, we actively work with our clients to identify the customisations required, to analyse the practical and conceptual impacts of the proposed changes and then to implement the final modifications.

In-house Enhancements

The AC frequently works with clients to enhance the conceptual soundness and performance of existing (in-house) methodologies and processes. During such assignments our focus is on retaining as much as possible of the existing methodology and process and building on that. Equally we seek to retain a practical perspective by prioritising enhancements in terms of importance and ease of change. In assisting clients to identify enhancements we draw upon not only our own “off the shelf” methodologies but also the experience of our associates and our knowledge of third-party methodologies.