We offer real return analyses to help financial institutions better understand interest rate and credit risk at the loan level resulting in more effective loan pricing and increased profitability.

Why Choose Us

We believe that modeling interest rate and credit risk in a holistic way under varying macroeconomic conditions can lead to more effective loan pricing and increased profitability. We utilize discounted cash flow models, which we run at a granular level under multiple macroeconomic forecasts. Our credit loss estimates are in full accordance with the Current Expected Credit Loss model.

We have found in many cases that financial institutions are underpricing for the interest rate and credit risk they are taking, particularly in the lower credit bands, and that the total return considering interest income earned and credit losses incurred is negative.

Our Approach

Our real return analyses are performed in connection with our Capital Stress Testing and Concentration Risk Analyses. Informed by the results of this work, we obtain loan pricing sheets and tailor our work to our client’s existing risk tiers and pricing bands.

We model expected prepayments and credit losses iteratively under multiple macroeconomic conditions to provide our clients with deep insights regarding potential real returns and help them identify the credit bands with the highest return.