TrueCapital™ software is an economic capital application that addresses the unique modeling challenges found in retail lending. TrueCapital provides more accurate capital estimates because it can distinguish controllable from uncontrollable volatility in your portfolio.
Argus™ introduces TrueCapital™ for 2006. TrueCapital computes the full range of statistically plausible futures for a retail lending portfolio, providing lenders with better estimates of economic capital for the portfolio (or segments within the portfolio).
TrueCapital is a framework for computing the theoretically correct credit risk component of economic capital. The approach leverages the scenario-based forecasting capabilities of PA's LookAhead® scenario-based forecasting software to analyze hundreds of thousands of scenarios and create a distribution of possible future outcomes for the portfolio. The forecasting is done using the actual maturation curves, vintage qualities, and seasonality for the portfolio currently on the books, without hidden assumptions on the outcome or borrowed parameters from other businesses. TrueCapital is a data-driven, portfolio-specific approach to computing capital.
Getting the right estimate of economic capital is critical across the institution:
- At the corporate level, proper capital estimates for multiple portfolios drive critical growth, investment, and executive compensation decisions. Having an objective, results-based methodology to set capital is very important in this arena.
- For a single product or portfolio, managers need to know if segment marketing strategies are within capital tolerances.
Incorrect or out-of-date capital estimates can easily cost the enterprise millions of dollars in lost opportunities and mal-investment.
In addition to economic capital, TrueCapital is being used to create sharper risk-based pricing, measure the robustness of business plans to changing economic environments and to optimize portfolio construction against capital constraints.
TrueCapital™ Key Features
- Incorporate both revenue and loss behavior into capital estimates
- Replay any single scenario to gauge its potential impact