THE BUSINESS APPLICATION
Where and how to use it
Use it to explore cash-flow timing, recovery horizons and portfolio runoff. It helps connect risk estimates to funding and earnings when the timing of receipts matters as much as their eventual amount.
A lender planning funding renewal examines whether loans are likely to run to maturity, prepay or default. Different timing patterns can change interest receipts and reinvestment needs even if initial balances match.
From evidence to a decision
- 01Active accountBegin each time interval
- 02Competing eventsDefault or prepay
- 03Surviving accountsContinue to the next interval
- 04Timing curvesMap events to cash flows
DATA REQUIREMENTS
What records does it need?
These are the records your team would bring together for this analysis. The exact fields and history needed depend on your lending products, the question you want to answer and the period you want to assess.
| Record category | What it contains | Why the detail matters |
|---|---|---|
| Account timeline | Origination, review dates, maturity and period-level exposure. | Use a consistent time grid. |
| Event histories | Default, prepayment, closure and relevant recovery dates. | Define mutually exclusive events where appropriate. |
| Observation end | Last known active date and reason for observation stopping. | Distinguish censoring from an observed event. |
Past loan outcomes help assess how well an estimate reflects your borrowers. For a new decision, use only the information available at that time; later repayments help you review the result afterwards.
Understand data readiness →WHAT YOU RECEIVE
The output
Survival and event probability curves, along with timing assumptions for downstream cash-flow calculations.
WHAT TO WATCH
The limitations
Sparse late-life observations can make distant projections uncertain. Event definitions and censoring assumptions materially affect the result.
FOR RISK & ANALYTICAL SPECIALISTSHow the analysis works+
The modelling approach
Discrete-time competing hazards or suitable survival models track event probabilities conditional on the account still being active. Unobserved future periods are censored, not labelled as uneventful completed histories.
What your risk team should review
Probability mass, competing events, time-grid consistency, censoring and horizon calibration.
The right approach depends on your portfolio and available history. Review the fit to your borrowers, the reliability of the estimates and the effect of missing information before using the result in a lending decision.