Programming the statistical procedures from SAS

Credit Risk- EAD and LGD Models

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Contributor
Posts: 33

Credit Risk- EAD and LGD Models

Hi,

 

This regarding  Credit Risk modelling. There are different models to assess the Risk involved in Credit involved in Banks.

PD 

LGD

EAD

 

Logistice Regression is a popular technique for PD Modelling.

 

Can some one please guide me what is the approach for EAD & LGD modelling.

 

Vishal

Contributor
Posts: 62

Re: Credit Risk- EAD and LGD Models

Hi,

 

This looks like it is an extensive topic, as SAS offer a training course: https://support.sas.com/edu/schedules.html?ctry=gb&id=2394

Norman.
SAS 9.4 (TS1M0) X64_7PRO WIN 6.1.7601 Service Pack 1 Workstation

Super User
Posts: 3,172

Re: Credit Risk- EAD and LGD Models

Check out a similar thread here that discusses LGD:

 

https://communities.sas.com/t5/SAS-Risk-Management/Simulating-LGD-Dataset/m-p/271640#U271640

 

EAD is often simply just the loan exposure - both drawn and undrawn added. There is really no need to model this. By analysing in-default loans it is usually quite easy to confirm if EAD can be simply the total exposure or not. Sometimes this figure needs to be adjusted for various products. For example credit cards are often allowed to go significantly overlimit so in this case EAD might be set to 105 or 110 percent of exposure. Also with transaction accounts with shadow limits then EAD may need to be adjusted. 

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