riskaware - Methodology

The new model is an enhancement of the DCF method to stress-test the vulnerability of future cash flow generation of the borrower in different macroeconomic scenarios.

  1. The model generates several macroeconomic scenarios diffusing around the market consensus and attaches probabilities to each scenario (Tailor-made MC-type GDP simulation).
  2. methodology1
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    methodology2
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  3. Connection between macro-economic expectations and company level performance is established through industry and company cyclicality functions.
  4. meth3
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    meth4
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  5. Future cash flow generation is calculated based on the latest financials of the borrower considering prevailing macroeconomic expectations and relevant industry and market specific factors.
  6. Comparing future cash flow generation, measured by the Enterprise Value of the borrower, to the amount and collateral of debt will give good indication about Expected Losses.
  7. meth5
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    meth6
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