System and method for evaluating idiosyncratic risk for cash flow variability

US8326746B1 · kind B1 · utility

Assignee

• Fannie Mae · US

Inventors

• Gordon Crawford · Richland, US
• William E. Schultz · Okemos, US
• Mingchao Chen · Washington, US
• Brian Burk · Washington, US

Key dates

• Filing date: Jun 25, 2008
• Grant date: Dec 4, 2012
• Expiry date: Jun 25, 2028

Classification

• Technology area (CPC G): Physics
• CPC primary: G06Q40/08
• WIPO field: IT methods for management
• WIPO sector: Electrical engineering

Abstract

A Monte Carlo simulation engine configured to perform a primary beneficiary test to determine whether a variable interest entity holder is a primary beneficiary of a financial instrument. The engine includes a cash flow engine configured to generate a set of default/prepayment curves representing one or more discrete cash flow scenarios for one or more loans for the financial instrument, the default/prepayment curves representative of systemic risk associated with the financial instrument. The engine further includes an idiosyncratic risk module configured to convert the set of default/prepayment curves defined by the cash flow engine into a number of occurrences, which, at an aggregated level, mimic the default/prepayment curve from a systemic risk model.