Interthinx Releases White Paper for Stress Testing on Retail Portfolios

""Interthinx's"":http://www.interthinx.com/ Predictive Analytics group published a new white paper outlining its recommendations for conducting stress testing on retail lending portfolios.

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The paper, titled ""A Proven Approach to Stress Testing Consumer Loan Portfolios"":http://www2.interthinx.com/Predictive_Analytics_Stress_Testing, details the measurements, data sets, and procedures needed to develop more sophisticated economic models to assist lenders in meeting stress-testing requirements.

""Scenario-based forecasting is a critical aspect in assessing a lender's ability to withstand economic stressors,"" said Michael Smith, chief technology officer and chief architect at Interthinx. [COLUMN_BREAK]

""By quantifying the factors driving portfolio performance, we can provide transparency in the modeling process so managers can see why performance changes.""

The key to this methodology, Interthinx says, is the isolation of portfolio performance components to separate the non-economic factors that can skew portfolio analyses and provide imprecise results. By considering economic factors separately, retail lenders are better able to predict how different economic scenarios would affect both their portfolios and the overall health of their capital reserves.

When conducting the analysis on behalf of clients, Interthinx relies on its Dual-time Dynamics (DtD) technology, which uses a two-stage decomposition process to analyze rates of change in delinquency, default, and other variables. The patented technology is able to distill historical portfolio performance down to its core drivers and isolate macroeconomic structure.

""Job one at Interthinx is to develop technology and processes that support our clients' strategic planning and risk mitigation initiatives,"" said Interthinx president Jeff Moyer. ""When combined with best practices in selecting economic variables, the information distillation that DtD decomposition provides can be invaluable for organizations seeking to create economic response models for stress testing.""