Key Takeaways.
Vintage is a colloquial term used to describe mortgage-backed securities (MBS) that have been "seasoned." That is, they've been issued long enough, and enough on-time payments have been made, that the risk of default is lower.
Vintage is the age of an item as it relates to the year it was created..
That is why it makes the vintage analysis a useful tool to conduct back-testing procedure of the PD model applied in the bank.
For this purpose, vintage analysis is used in the quantitative variant.
It includes the analysis of the number of loans for which the bank determined the occurrence of default..
In credit risk, it is a popular method for managing credit risk.
The term 'Vintage' refers to the month or quarter in which account was opened (loan was granted).
In simple words, the vintage analysis measures the performance of a portfolio in different periods of time after the loan (or credit card) was granted..
Vintage analysis as a basic tool for monitoring credit risk.
Mathematical Economics, 2011, Nr 7 (14), s. 213-228 Among many tools used by bankers in the process of credit risk management, vintage analysis is the most often applied.
Its simplicity and clarity of interpretation of the results means that banking professionals call it “basic analysis”.
The main change to the vintage analysis method under CECL is that the allowance will be reflected by the remaining area under the loss curve (which is the expected credit losses on the remaining life of the asset) instead of being reflected by a point on the loss curve.
Its simplicity and clarity of interpretation of the results means that banking professionals call it “basic analysis”.
In this article, the concept of vintage analysis is presented, along with the right way to get interpretations of results.
Credit portfolios, indirect auto loans, and other consumer loans work well with the Vintage model.
Roll-rate Method (Migration Analysis):
