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.