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FRM Part II · FRM Exam Part II · Credit Scoring and Retail Credit Risk Management

A retail lender has 10,000 accounts in the 30-days-past-due bucket at the start of a month. By month-end, 1,500 have moved to 60 days past due, 6,000 have cured to current, and the rest remain at 30 days. What is the roll rate from 30 to 60 days, and the cure rate?

The roll rate is 15%, being 1,500 of 10,000 accounts moving to 60 days past due, and the cure rate is 60%, being 6,000 of 10,000 returning to current. The remaining 25% stay in the 30-day bucket.

  1. ARoll rate 15%; cure rate 60%Correct
  2. BRoll rate 25%; cure rate 60%
  3. CRoll rate 15%; cure rate 75%
  4. DRoll rate 60%; cure rate 15%

Explanation

Roll rate = 1,500/10,000 = 15%. Cure rate = 6,000/10,000 = 60%. The remaining 2,500 stay at 30 days. Using 25% as roll rate wrongly includes the accounts that stayed in the bucket.

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