stress testing
Credit Loss Modeling Services: COVID qualitative adjustments, Stress Testing, and CECL
Activities from pricing, budgeting, allowance preparation, and stress testing depend on current and forward-looking expectations for the volume and timing of credit losses. Estimating losses in an environment that differs from recent historical experience in a consistent, quantitatively justified manner requires the use of some form of modeling approach. While the application of those models and underlying assumptions vary by activity, the model should still reflect the institution’s best estimate, and should not consider any reliable inputs “off-limits” during development.