Roll Rate Rules

The Roll Rate rule is created at the Modelling Set and Economic Scenario Rule level. The Roll Rate Rule is a prerequisite for the Roll Rate Method of ECL. The key inputs for the roll rate rule are as follows:

• Base Transition Matrix:
  • Users should provide mandatory inputs like Transition Matrix Type, Transition Matrix Frequency, Computation Basis and Transition Matrix Projection Cap.
  • If a Days Past Dues (DPD) based transition matrix is required, then users can define various DPD bands.
  • Base Transition Matrix can be generated through the Historical Average Transition Matrix (HATM) process or with the manual input.
    • If users select the HATM process, then the historical data cap is also expected as input.
    • If users select the manual input option, then the required transition matrix needs to be filled manually.

      Note:

      The manual input transition matrix is used as the base transition matrix.
• Gross Loss Rate:
  • To calculate Gross Loss Rate, users need to provide inputs for Loss Rate Historical Frequency and Loss Rate Historical Cap.