Releases

The challenge with historical credit data

Historical credit data are vital for a host of credit portfolio management activities: Starting with assessment of the performance of different types of credits and all the way to the construction of sophisticated credit risk models. Such is the importance of data inputs that for risk models impacting significant decision-making / external reporting there are even prescribed minimum requirements for the type and quality of necessary historical credit data.

Release of version 0.4.1 of the transitionMatrix package focuses on stressing transition matrices

Further building the open source OpenCPM toolkit this realease of transitionMatrix features:

1. Feature: Added functionality for conditioning multi-period transition matrices
2. Training: Example calculation and visualization of conditional matrices
3. Datasets: State space description and CGS mappings for top-6 credit rating agencies

Release of version 0.4 of the transitionMatrix package

Further building the open source OpenCPM toolkit this realease of transitionMatrix features:

1. Feature: Added Aalen-Johansen Duration Estimator
2. Documentation: Major overhaul of documentation, now targeting ReadTheDocs distribution
3. Training: Streamlining of all examples
4. Installation: Pypi and wheel installation options
5. Datasets: Synthetic Datasets in long format

Enjoy!

Release of version 0.4 of the Concentration Library adds Geographic / Industrial concentration indexes

Further building out the OpenCPM set of tools, we release version 0.4 of the Concentration Library, a python library for the computation of various concentration, diversification and inequality indices.

Representing economic activity using pictograms

Visualization can produce significant new insights when applied to quantitative data. It is currently undergoing a renaissance that mirrors other developments in computing and data science. Sophisticated open source libraries such as d3.js or matplotlib, to name but a couple, are enabling an ever wider range of users to distill valuable information from the avalanche of data being produced.

Extending the Open Risk API to include the EBA Portfolio Data Templates

The Open Risk API provides a mechanism to integrate arbitrary collections of risk data and risk modelling resources in the context of assessing and managing financial risk. It is based on two key technologies of the modern Web, RESTful architectures and Semantic Data.

Credit Portfolio Management in the IFRS 9 / CECL and Stress Testing Era

The post-crisis world presents portfolio managers with the significant challenge to asimilate in day-to-day management the variety of conceptual frameworks now simultaneously applicable in the assessment of portfolio credit risk:

• The first major strand is the widespread application of regulatory stress testing methodologies in the estimation of regulatory risk capital requirements
• The second major strand is the introduction of new accounting standards (IFRS 9 / CECL) for the measurement and disclosure of expected credit losses While both Regulatory Stress Testing and IFRS 9 / CECL accounting require investment in analytic capabilities and provide unique new insights, both are aimed at satisfying evolving prudential or investor disclosure requirements. Neither is designed to help credit portfolio managers analyse and steer their portfolios in the bottom-up fashion that is an essential part their mandate.

The above developments are overlaid into pre-existing conceptual and practical frameworks such as

What are European Safe Bonds?

While the creation of the eurozone was a landmark of the European integration process, the financial crisis highlighted that the eurozone remains an incomplete design which can lead to unpredictable and adverse situations in the event of a (the) next major crisis. One of the key such incompleteness features of the current eurozone architecture is that it does not have a truly risk-free (safe) euro debt instrument: one that continues being serviced (avoids a default event) at virtually any point in time and state of the world, no matter how severe.

Release of version 0.3 of the ConcentrationMetrics Library

Further building out the OpenCPM set of tools, we release version 0.3 of the ConcentrationMetrics Library. This python library for the computation of various concentration, diversification and inequality indices.

The below list provides documentation URL’s for each one of the implemented indexes

Motivation for Building an open source database based on EBA’s Standardized NPL Templates

In an insightful recent piece, “Overcoming non-performing loan market failures with transaction platforms”, Fell et al. dug deeply into the market failures that help perpetuate the Non-performing loan (NPL) problem. They highlight, in particular, information asymmetries and the attendant costs of valuing NPL portfolios as key obstacles. In the same wavelength, the European Banking Authority published standardized NPL data templates as a step towards reducing the obstacles that prevent the reduction of NPL’s.

Transition Matrix Library First Release

Open Risk released version 0.1 of the Transition Matrix Library

Motivation

State transition phenomena where a system exhibits stochastic (random) migration between well-defined discrete states (see picture below for an illustration) are very common in a variety of fields. Depending on the precise specification and modelling assumptions they may go under the name of multi-state models, Markov chain models or state-space models.

Loan Level Templates Using Python

In this Open Risk Academy course we figure step by step how to use python to work with Loan Level Templates, using the ECB SME template as an example.

• Overview of the loan level template
• Manipulating spreadsheets with Python
• The Python Dictionary
• Organization of Portfolio Data
• Generating Test Portfolios

Get an Open Risk Academy account and get started with the course here

How much digital bank can we fit in a 50 euro bill?

Much has been said about the impact of Big Data and high-end GPU Computing on the provision of digital financial services. At Open Risk we wanted to explore the boundary of what is possible at the diametrically opposite end of the cost spectrum:

What is the_absolutely minimum_cost for providing digital financial services? . In this post we begin the journey of finding out the answer to that question and it promises to be fascinating!

Fintech Risk Events

Fintech Risk Events is an open catalog of observed and publicized operational failures of fintech business models. The catalog aims to document, in due course, such events reasonably accurately, to allow risk managers understand the (potentially new) vulnerabilities of new financial services models.

Scope

The scope of the operational risk database is Fintech companies. By that we mean newly established financial services providers that operate exclusively via new (digital) platforms and are (mostly) unregulated. The fintech sector is distinct from established financial services firms that operate with a mix of technology platforms and are (mostly) regulated.

Talk of unbundling the banks is all the rage these days (if we believe the chatter coming from fintech startups). Yet upon closer inspection one gets the feeling that these optimistic people might not necessarily know exactly what they are trying to unbundle, the true complexity of a medium-to-large bank, which in turn reflects, at least in part, the complexity of our modern Financial System .

Open source software is all the rage those days in IT and the concept is making rapid inroads in all parts of the enterprise. An earlier comprehensive survey by Gartner, Inc. found that by 2011 more than half of organizations surveyed had adopted open-source software (OSS) solutions as part of their IT strategy. This percentage may have currently exceeded the 75% mark according to open source advisory firms.

If you work in financial risk management you will most likely recognize where the following sentence is coming from:

One of the most significant lessons learned from the global financial crisis that began in 2007 was that banks information technology (IT) and data architectures were inadequate to support the broad management of financial risks. This had severe consequences to the banks themselves and to the stability of the financial system as a whole

Resources fo Concentration Risk Management

Concentration Risk Management is a staple of risk management. Open Risk developed a unique and novel set of risk management resources to assist with building in-house knowledge for managing credit concentration risks.

Resources range from courses and online manuals to open source calculators and mobile eLearning games. In this post we have a brief summary of what is available, you can find more details by clicking on the embedded links

You know the periodic table of elements, even if you flunked your science courses! It is the large colorful and blocky table that hanged on every school’s classrooms before becoming yet another mobile app. The periodic table is one of the early and iconic achievements of science. It lists all the pure chemical elements found in nature, the building blocks of all possible material substances. Each block contains a set of numbers that unambiguously characterizes each element and a single or two letter abbreviation for each: H for Hydrogen, He for Helium and so forth, going on for over a hundred different elements. When the periodic table was discovered by Mendeleev (apparently in his dream!) it was an extraordinary realization that the physical world has an underlying order at the microscopic level. In his own words:

Visualizing the Stress of US Banks

A recurring cycle of regulatory stress testing exercises has become the new normal in the banking world, at least on the two shores of the northern Atlantic. The periodicity of the European stress testing heartbeat has not yet been firmly established. Did we just miss a beat in 2015 (a so called palpitation) or will the European cycle have two (or more) years periodicity? Who knows. Fortunately, there are no such uncertainties around the US stress testing cycle. The US CCAR rhythm seems to be a very robust annual throb and in March we just got the latest iteration.