Building Credit Models

If you are building alternative credit default models for improving internal management, refining credit exposure limit setting or for making better investment decisions, Alacra can help provide a clean, de-duped and cross-mapped file of entities with credit ratings and other credit-related pricing or default metrics.

Alacra Engagements

One of the world’s largest banks builds credit default models

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One of the world’s largest banks builds credit default models

Challenges

One of the world’s largest banks (by assets) was seeking to build out credit models to assess the default probabilities of its counterparties. They needed to know an entity’s credit rating and regulatory status, as well as information on its ultimate parent, former names and security trading history. And they needed all this information in one single, clean, accurate and timely file.

Solution

Alacra was able to concord credit ratings information from each of the credit rating agencies together with information coming directly from the regulators as well as proprietary data vendors (to which the client had a license). In addition, Alacra was able to provide information about the “type” of each entity in the concorded feed, e.g., investment bank vs. commercial bank vs. broker-dealer.

Result

Alacra is providing a single feed covering the client’s rated universe of over 7,000 legal entities. The file is cross-referenced and mapped to information from all the ratings agencies, Moody’s KMV, and Bureau van Dijk. By using the “entity type” field, the client is able to develop and test separately configured models for each type of financial institution and being able to uniquely account for different financial structures and operating practices.