Developing validating and using internal ratings methodologies and case studies
Aptivaa developed several PD and LGD models for Retail and Corporate portfolios and delivered a strategic roadmap to the client to attain IRB Compliance.
The models developed resulted in significant capital savings for the Bank.
Grades come in two categories: credit ratings and credit scores.
Credit ratings are a small number of discrete classes, usually labeled with letters, such as 'AAA', 'BB-', etc.
For larger loans, accessible to small- to medium-sized companies and larger corporations, credit ratings are usually used, and the grading process may involve a combination of automated algorithms and expert analysis.
There are rating agencies that keep track of the creditworthiness of companies.
Credit scores are numeric grades such as '640' or '720'.
This example shows how to build an automated credit rating tool.
We assume that historical information is available in the form of a data set where each record contains the features of a borrower and the credit rating that was assigned to it.