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.