Loss Forecasting

Loss forecasting for banks—whether CECL or stress testing—is our specialty! That’s end-to-end: from building and preparing developmental databases to the actual model development to implementation within commercially-available (or custom) production platforms to ongoing performance monitoring (OPM) during production to qualitative adjustments frameworks that are closely related to OPM.

1. Loss forecasting based on economic theory, rather than simply statistical regularities that provide rigorous yet intuitive risk measures that are sound, sophisticated, and simple.
2. Insights into the nature of historical observations and patterns and their applicability to forecasting.

Spero Risk Associates has substantial experience with all aspects of stress testing, scenario analysis, and design, especially, but not limited to, CECL, CCAR and DFAST. In fact, we built many hypothetical and historical scenarios for both credit and market risk, as well as joint credit-and-market loss scenarios years before the crisis and CCAR.

We understand relationships between the firm, its environment, and risk factors, such as the industry, social and political conditions, technology, and regulations, which are as ever-changing as the firm.

Along with a loss-forecasting framework, we are able to recommend and build appropriate scenario and sensitivity analyses as well as ongoing monitoring to estimate the consequences of potential combinations of events and how forecasts can affect your model’s bounds.