Covariance of retail loan product performances

摘要

The present invention relates to a method that allows managers of retail portfolios to compute performance time series that have been cleaned of marketing impacts, lifecycles, management actions, and seasonality, leaving only the performance changes due to the environment. These normalized series can be used to compute the necessary covariance matrices for portfolio optimization or computing portfolio-level economic capital. The invention applies to any retail product or segment where vintage-level performance time series are being stored.