At the very same time as the
financial crisis 2008 is happening, I've been
working on software development projects in the
credit risk rating area. As one of the developers of the
Credit Risk Rating Platform, my goal is to give our customers (the banks) the ability to manage credit risks and the ability to
quickly adapt to changes in the rating calculation. Our customers want to be able to change the logic how ratings are calculated. And they want to be able to do that on their own and very quickly.
Formerly they all used a bunch of proprietary pieces, put together into
ugly Excel sheets and Visual Basic spaghetti code. This looks fine in the books and every business guy can do it or at least change some formulas in there. However, lots of different Excel documents with lots of sheets and lots of colors and lots of different mathematical and statistical functions and lots of macro code and lots of cycling dependencies between cells ... well, you get the point. It just becomes plain unmanageable and chaotic. (
"Which LGD excel sheet was used for customer X? I cannot find the latest version on the network drive...")
"The Platform" let's customers change the way the software behaves after it has been rolled out. "The Platform" is the core of our Credit Risk Rating Platform. With The
Dynamic Business Application Platform, any new logic can be brought into the application
by the customer without the need for a software developer to change a single line of code. (Of course, this only applies to the core application. The systems usually are solutions with additional features which are not based on the DBAF.)
Experts like financial analysts can now model how the program should calculate. They do it
visually, transparently and well-documented with tool support. What has once been deeply hidden somewhere in a formula cell near the end of some Excel sheet is now visually describable, versioned, documented and tested. And it looks much better. Compare for yourself, how the two concepts look like:
Before: (with Excel)
After: (with Visual Rules)
The graphics do not show the exact same, i just wanted show how they're conceptually different. For example the Excel formula
G10:=NORMSINV(B10); will probably be very similar in Visual Rules, something along the lines of
DefaultThresold[10] := normsInverse(ProbabilityOfDefault[10]);.
One of the advantages is that the formula can now be expressed with more
meaningful names, it can be described (the name of the blue assignment note is "Calculate PD" instead of "C10" in Excel) and documented. And
you can see loops and decisions directly in the visual model. This is really good and
helps to navigate quickly in complex rating models,
even after months and years. Just think of the times where you have looked at some Excel formulas after years and wondered: "Did I write this garbage?! I don't remember what $G$I is and how the heck this all works. It'll take weeks to understand it again."
