Mizuho–DL Financial Technology Co., Ltd.Mizuho–DL Financial Technology Co., Ltd.



Credit Risk Measurement System for Credit Portfolios

CreditGaugeregistered trademark is a software that measures the credit risk of credit portfolios. It utilizes Monte Carlo methods to analyze the distribution of loss of a credit portfolio (i.e.Credit VaR).
CreditGaugeregistered trademark has been designated by the Regional Banks Association of Japan as a credit risk assessment tool in its project to enhance credit risk management, which started in December 2004 (i.e. the credit risk information total system or CRITS) and was updated to the latest version, in which macro stress testing function is implemented, in April 2014. It is used by 63 regional banks (as of November 30, 2015) as well as other financial institutions including 2nd–tier regional banks.

Main Functions

Risk Measurement

  • Perform risk measurements with Monte–Carlo simulation
  • Select from default mode (book value approach) and MtM mode (fair value approach)
  • Cover corporate assets, retail assets, and securitizations
  • Incorporate the effects of chain reaction bankruptcy into risk measurement
  • Select the risk horizon from 1 to 5 year(s)

Risk Analysis

  • Allocate risks at various levels of granularity including obligor and exposure levels, thereby enabling risk analyses from different perspectives
  • Identify the origin of risks by decomposing them into credit concentration factors (unsystematic risk) and default rate variation factors (systematic risk)

Stress Testing

  • Perform stress testing to assess the effects of stress scenarios on risk parameters and risk measures by inputting the scenarios for macroeconomic indicators arbitrarily selected by users
  • Set flexible stress scenarios on risk parameters or on the attributes of individual obligors including rating and credit exposure

Sensitivity Estimation

  • Estimate sensitivity parameters, which represent credit–worthiness correlation between obligors
  • Input sensitivity parameters estimated by clients directly

Analytical Method (optional)

  • Perform extremely fast risk measurements and analyses without losing accuracy with our original "Analytical Method," which resolves a weakness of Monte–Carlo simulations, i.e. the trade–off between speed and accuracy
  • Evaluate credit concentration risks more accurately with "Analytical Method", which enables calculation of (VaR–based or CVaR–based) risk contributions

Image:Credit Risk Measurement System for Credit Portfolios

Top of Page