AssetAssayer™ – Predictive Modeling
Berkshire Group uses proprietary predictive modeling tools to project performance, to forecast required loss reserves, funding, and capital, and to arrive at values for loans, servicing rights, structured bonds, and derivatives. We work with clients to obtain and process loan level data, filling in missing fields, interpreting data field codes, and mapping and formatting into a consistent structure, readable by our models. We populate the models with appropriate assumptions, depending on the timeframe and purpose of the modeling.
We project balances, cash flows, delinquencies and losses using a Markov process whereby the values each period depend on the previous period’s values, but are conditionally independent of the previous values of the stochastic process – in other words, the behavior of the process in the future is stochastically independent of its behavior in the past, given the current state of the process. We produce detail and summary reports along the way to obtain an overview of the relative risk characteristics of each pool.
If loans are contained within a securitization structure, we can reverse engineer the deal and model the structured cash flow waterfall in order to properly project cash flows for each bond.
Loss Forecasting and Reserve Analysis
Berkshire Group works with banks and other portfolio lenders to:
- Analyze the general and specific credit risk within their residential and commercial mortgage portfolios
- Project delinquency roll-rate and migration patterns
- Determine timing and magnitude of provisions, charge-offs, liquidations, realized losses, costs and recoveries
- Project the monthly balance sheet and income statement impacts
We assist our clients in modeling the portfolios and in documenting policies and procedures.