2015 Summer projects- SAS credit risk project summary

SAS Credit Risk Project

Designed & led by Financial Math Alumnus- Jonathan Leonardelli

Objective:
For students to apply credit risk concepts while developing SAS programming skills

Goals:
1. Become Base SAS certified
2. Have an understanding of CCAR and Basel II calculations
3. Learn how to model PD / LGD / EAD
4. Use equations to calculate Expected Loss (EL), RWA (Risk Weighted Assets), and capital ratios

By Aisha Barnes & Preethi Kankanala- The purpose of the summer SAS case study was to develop an understanding of the different steps that are involved in calculating the loss portion of CCAR (Comprehensive Credit Analysis & Review). CCAR is a regulatory framework that ensures Bank Holding Companies (BHCs) have enough capital under the worst scenarios. This is tested under various stress-testing scenarios.

In our case study, we analyzed a portfolio of different products and estimated the capital that is required to hold the portfolio under three different scenarios. For this, we have estimated the historic Probability of Default (PD)*, Loss Given Default (LGD)* and Exposure at Default (EAD) and forecasted the future values using a variety of techniques (e.g., regression models) in SAS. Then we used these values to estimate risk weighted assets and capital.

This exercise helps BHCs ensure that they have enough capital if there is any change in the economic conditions. If the capital plan does not pass regulatory review, then the company has to change it to ensure there is adequate regulatory capital.

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"Throughout the project, Financial Math Alumnus and Board Member, Jonathan Leonardelli, directed and mentored our team. We gained knowledge and enhanced our technical and business skills under his guidance. The project provided us hands-on experience on estimating the credit metrics and how to apply them with real world problems."- Preethi Kankanala, December 2015 Graduate

"This summer I experienced real application of how I will use my Financial Mathematics degree. I learned how to program in SAS and plan to gain certification. I used SAS to find the amount of capital a bank reserves to meet the Basel II requirements. I feel confident in having these skills."- Aisha Barnes, December 2015 Graduate

*PD (Probability of Default) = likelihood that a loan will default in the future
*LGD (Loss Given Default) = amount a bank will lose if a customer defaults on their loans

(All the project groups presented their summaries at the end of the summer session. More info to come soon from the other groups).
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Join our new workshop- “Introduction to Financial Risk”

NC State's Financial Math program has partnered with 2004 Alumnus, Jonathan Leonardelli, to create a new workshop series "Introduction to Financial Risk" for all NC State students and faculty. The workshop is also opened to the public.

Students and faculty in Mathematics, Statistics, Economics, Finance, Operations Research, MBA and other related programs are welcome to join!

Here is what you will learn:

Risk Workshop Overview

Presenter information:

Jonathan Leonardelli, FRM, MFM

Jonathan Leonardelli, Risk Consultant at the Financial Risk Group, specializes in credit and market risk management. Over the course of his career he developed a diverse knowledge of retail banking risk as well as the technical skills needed to integrate risk assessment processes into a company’s business and technology infrastructure.

Jonathan’s career started with positions in the credit risk groups at Wells Fargo (Wachovia) and BB&T. In these positions, he developed expertise in acquisitions and portfolio risk management.  In his current position, Jonathan develops and implements processes that provide quantitative risk assessment and reporting capabilities for clients that include banks, hedge funds, and asset management companies.

Jonathan is an experienced presenter and author.  He is a certified SAS® Risk Dimensions Instructor. His papers in financial risk management covered topics such as the Dodd-Frank Act and its implications for risk professionals, as well as techniques for handling missing data. He has also authored a Webinar for the Insurance & Finance SAS® Users Group (IFSUG) regarding loss estimation using roll rate matrices.

Jonathan holds an Masters of Financial Mathematics from North Carolina State University and is a member of the Global Association of Risk Professionals (GARP).

FRM designation since 2010

SAS Certified Advanced Programmer for SAS 9

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Those interested- please contact Leslie Bowman, Director of Career Services- leslie_bowman@ncsu.edu 

Workshop begins Friday, September 5th 2014- registration deadline, August 28th