Backtesting: Measuring the Effectiveness of Your ALLL Methodology

Apr 23, 2015

Backtesting your ALLL is one way to show the accuracy of your estimates and to add defensibility when dealing with examiners and auditors. It consists of comparing forecasted losses with actual losses and examining the variance. This whitepaper addresses questions financial institutions should ask to assess model accuracy, at both the portfolio and concentration level.

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