riskaware - Introduction

QCR's credit risk management application, RISKAWARE, combines quantitative modelling tools and fundamental credit research to establish fair value of credit. It calculates Expected Losses by establishing PD&LGD ratios for individual loans and the whole portfolio considering all credit driving factors and prevailing macro expectations in the economy.

The model is cash-flow based and forward looking as it tests the vulnerability of future cash flow generation of the borrower in different macro-economic scenarios (RISKAWARE/Methodology). The model can add value to hedge funds to create an edge on the credit markets by quantifying credit risk better than existing methodologies. The banking application of the model can make monitoring and stress-testing of individual loans and the portfolio easy stress-testing of individual loans and the portfolio easy (RISKAWARE/Benefits).

The model was successfully tested on several credits at the European leverage loan market, back-testing showed 20% annual profit on a cash-neutral trading strategy in 2007-2009.