What Is IFRS 9?

IFRS 9 is the International Financial Reporting Standard that addresses the accounting of financial instruments, such as loans, mortgages, and other credit instruments. The directive has three core components: classification of instruments, impairment calculation, and hedge accounting.

Because credit instruments are at risk of default, accounting for instruments in accounts must consider likelihood of future impairment, through expected loss and lifetime expected credit loss. Model-oriented approaches are required. Credit and regulatory risk teams thus perform IFRS 9 tasks, such as:

Asset classification, through statistical and machine learning methods
Macroeconomic modeling
Scenario generation and scenario analysis
Stochastic modelling of default and recovery
Automated reporting, reflecting point-in-time model and data selection, which may incur regulator scrutiny

Examples and How To

Modeling Probabilities of Default with Cox Proportional Hazards - Example
Stress Testing of Consumer Credit Default Probabilities - Example
Using MATLAB for Macroeconomic Stress Testing (26:29) - Video
Forecasting Corporate Default Rates with MATLAB (54:36) - Video
Credit Risk Modeling with MATLAB (53:09) - Video
Modeling Correlated Defaults with Copulas - Example
Classify Data Using the Classification Learner App (4:34) - Video

Software Reference

creditscorecard: Create creditscorecard object - Documentation
Binning Explorer: Bin data and export into a creditscorecard object - Documentation
creditDefaultCopula: Simulate and analyze multifactor credit default model - Documentation
Classification Learner App - Documentation

Using MATLAB to Develop Macroeconomic Models

Effective Model Risk Management with MATLAB

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Risk Management with MATLAB

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