eqlx-credit 0.2.0__tar.gz

eqlx_credit-0.2.0/LICENSE

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eqlx_credit-0.2.0/PKG-INFO

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+Metadata-Version: 2.4
+Name: eqlx-credit
+Version: 0.2.0
+Summary: Open tools for credit-risk model work: PD validation tests, calibration, master scales and low-default portfolio methods.
+Keywords: credit risk,probability of default,IRB,Basel,model validation,low default portfolio
+Author: Can Demir
+Author-email: Can Demir <can.demir@eqlx.ai>
+License-Expression: Apache-2.0
+License-File: LICENSE
+Classifier: Development Status :: 3 - Alpha
+Classifier: Intended Audience :: Financial and Insurance Industry
+Classifier: Intended Audience :: Science/Research
+Classifier: Programming Language :: Python :: 3
+Classifier: Topic :: Office/Business :: Financial
+Classifier: Topic :: Scientific/Engineering :: Mathematics
+Requires-Dist: numpy>=1.26
+Requires-Dist: scipy>=1.11
+Requires-Python: >=3.10
+Project-URL: Homepage, https://eqlx.org
+Description-Content-Type: text/markdown
+
+# eqlx-credit
+
+Open tools for credit-risk model work: discriminatory power with confidence intervals, PD back-testing
+that allows for correlated defaults, cohort default rates, calibration, master scales, low-default
+portfolio methods and the Basel IRB risk-weight functions.
+
+Built by [eqlx](https://eqlx.ai) from public regulation and published research. Part of
+[eqlx.org](https://eqlx.org).
+
+> Status: alpha (0.2). Every function is tested against a closed form, a published table or worked
+> example, a brute-force calculation, or a simulation. The API may still change.
+
+## Install
+
+```bash
+pip install git+https://github.com/eqlx-ai/eqlx-credit
+```
+
+Python 3.10+, depends only on NumPy and SciPy.
+
+## What is inside
+
+| Area | Function | What it answers | Source |
+|---|---|---|---|
+| Discrimination | `auc`, `gini`, `ks`, `auc_from_counts` | Does the model rank defaulters above non-defaulters? | |
+| | `auc_ci`, `auc_ci_from_counts` | How precise is that AUC? (DeLong standard error) | DeLong et al. (1988) |
+| | `auc_decline_test` | Has the AUC fallen significantly since initial validation? | ECB validation reporting instructions (2019) |
+| PD back-testing | `jeffreys_test` | Is each grade's PD consistent with its defaults? | ECB validation reporting instructions (2019) |
+| | `binomial_test(..., rho=)` | The same, optionally allowing for correlated defaults | BCBS WP14 (2005), Vasicek |
+| | `traffic_light` | Green / yellow / red per grade at thresholds you set | Tasche (2003) |
+| | `hosmer_lemeshow` | Are the PDs right across all grades at once? | |
+| | `normal_test` | Are the PDs right across several years? | BCBS WP14 (2005) |
+| | `spiegelhalter` | Are obligor-level PDs right? | Spiegelhalter (1986) |
+| Default rates | `cohort_default_rates`, `long_run_average` | One-year default rates per cohort and their long-run average | EBA/GL/2017/16 |
+| Stability | `psi`, `hhi(..., exposure=)` | Has the portfolio moved? Is it concentrated (by count or exposure)? | Siddiqi (2006) |
+| Calibration | `anchor_to_central_tendency` | Shift PDs to a target average, keeping the ranking | |
+| | `fit_ct_ar`, `grade_positions` | Grade PDs from a central tendency and an accuracy ratio | Tasche (2013) |
+| | `apply_pd_floor` | Regulatory PD floor | Basel II, CRR, Basel III |
+| Low-default portfolios | `pluto_tasche` | Most prudent PD upper bounds, independent or correlated defaults | Pluto & Tasche (2005) |
+| | `van_der_burgt` | Grade PDs from a fitted CAP curve | van der Burgt (2008) |
+| Master scale | `geometric_master_scale`, `master_scale_from_midpoints` | The PD-to-grade ladder, with a separate defaulted grade | |
+| Capital | `risk_weight`, `capital_requirement`, `asset_correlation` | Basel IRB risk weights: corporate (with SME adjustment and maturity), mortgage, QRRE, other retail | Basel II ¶272–330, Annex 5 |
+
+Conventions: grades run from lowest to highest risk; by default a higher score means higher risk
+(`higher_is_riskier=False` for scorecards where a high score is safe); `1` in a default flag means
+default; a PD of 1 maps to the master scale's defaulted grade, never to a performing grade.
+
+## Agent skill: annual PD validation
+
+[`skills/annual-pd-validation`](skills/annual-pd-validation) is an Agent Skill that lets an AI agent prepare the
+evidence for an annual PD validation: it runs every test through eqlx-credit, reads the results, and drafts the
+report in the user's language. The agent never computes a number itself and never gives the validation opinion; the
+conclusion and signature stay with the validator. On the bundled synthetic portfolio it finds the planted problems:
+a significant AUC decline since initial validation and one grade with far more defaults than its PD implies.
+
+## An annual validation pass
+
+[`examples/validation_report.py`](examples/validation_report.py), on a synthetic grade table:
+
+```python
+import numpy as np
+import eqlx_credit as ec
+
+n = np.array([820, 1450, 1910, 1320, 640, 210])  # obligors per grade at the start of the year
+d = np.array([1, 4, 11, 19, 21, 17])  # defaults during the year
+pd = np.array([0.0012, 0.0035, 0.0070, 0.0140, 0.0300, 0.0700])
+
+cur = ec.auc_ci_from_counts(n, d)  # AUC with DeLong confidence interval
+ec.auc_decline_test(0.80, cur)  # vs the AUC at initial validation
+ec.jeffreys_test(n, d, pd).rows()  # one dict per grade, ready for a report table
+ec.traffic_light(n, d, pd, rho=0.12).colours  # allowing for correlated defaults
+ec.risk_weight(pd, 0.45)  # Basel IRB, corporate, LGD 45%, M 2.5
+```
+
+```text
+AUC 0.785 (95% CI 0.734-0.836), Gini 0.570
+Decline vs initial 0.800: S = 0.57, p = 0.285
+grade 1:   1 defaults vs   1.0 expected, Jeffreys p = 0.421, traffic light green
+grade 2:   4 defaults vs   5.1 expected, Jeffreys p = 0.662, traffic light green
+grade 3:  11 defaults vs  13.4 expected, Jeffreys p = 0.734, traffic light green
+grade 4:  19 defaults vs  18.5 expected, Jeffreys p = 0.437, traffic light green
+grade 5:  21 defaults vs  19.2 expected, Jeffreys p = 0.327, traffic light green
+grade 6:  17 defaults vs  14.7 expected, Jeffreys p = 0.259, traffic light green
+Normal test over 5 years: z = 0.89
+Risk weights: 33.0% 58.8% 80.5% 103.4% 128.4% 168.9%
+```
+
+## A low-default portfolio
+
+[`examples/quickstart.py`](examples/quickstart.py):
+
+```python
+n_obligors = np.array([120, 340, 510, 430, 260, 90])
+n_defaults = np.array([0, 0, 1, 2, 3, 2])
+
+ec.pluto_tasche(n_obligors, n_defaults, confidence=0.9, rho=0.12)
+ec.fit_ct_ar(n_obligors, central_tendency=0.015, accuracy_ratio=0.65).pd
+ec.van_der_burgt(n_obligors, central_tendency=0.015, accuracy_ratio=0.65).pd
+```
+
+```text
+Pluto-Tasche (90%, rho=0.12): [ 2.511  2.652  3.172  4.263  6.336 10.761] %
+CT/AR curve:                  [ 0.037  0.135  0.421  1.205  3.383 10.692] %
+van der Burgt:                [0.044 0.093 0.366 1.525 4.246 7.134] %
+Master scale grades:          [ 2  5  8 11 14 17]
+```
+
+## How it is tested
+
+- **Basel IRB:** all eight columns of Basel II Annex 5 ("Illustrative IRB Risk Weights") reproduced to
+  the published two decimals.
+- **Pluto–Tasche:** the paper's worked example (0.29%, 0.33%, 0.76%).
+- **DeLong:** against an explicit obligor-by-obligor placement calculation, and by simulation: the
+  standard error matches the spread of simulated AUCs and the 95% interval covers the true AUC about
+  95% of the time.
+- **Correlated binomial:** against a Monte Carlo simulation of the one-factor model.
+- **Spiegelhalter:** a hand calculation, and standard normal under correct PDs by simulation.
+- **Cohorts:** hand-built panels, including the horizon boundary and 29 February.
+
+## Notes on the methods
+
+- Use the obligor-average PD at the start of the period per grade as the grade PD in back-tests.
+- `binomial_test` with `rho=0` assumes independent defaults and rejects too often when defaults are
+  correlated; pass an asset correlation, or read it next to `traffic_light(..., rho=)`.
+- Thresholds (test levels, traffic-light quantiles, PSI readings) are policy choices; set your own.
+- `hosmer_lemeshow` uses `K` degrees of freedom for `K` grades (out-of-sample use).
+- `pluto_tasche` is the single-period version; in practice the bounds are often rescaled to the central
+  tendency afterwards.
+- `fit_ct_ar` uses Tasche's robust-logit grade positions by default but matches the accuracy ratio
+  exactly on the grade distribution rather than through his moment approximation;
+  `placement="even"` gives the v0.1 behaviour.
+- `van_der_burgt` returns each grade's PD as the average slope of the CAP curve over that grade, so the
+  weighted mean equals the central tendency exactly; grading makes the grade-level AR a little lower.
+- `risk_weight` defaults to no 1.06 scaling factor (Basel III final); pass `scaling=1.06` for Basel II /
+  CRR. PD floors differ by framework and are the caller's choice.
+
+## References
+
+- Basel Committee on Banking Supervision (2006). International Convergence of Capital Measurement and
+  Capital Standards, ¶272–330 and Annex 5.
+- Basel Committee on Banking Supervision (2005). An Explanatory Note on the Basel II IRB Risk Weight
+  Functions.
+- Basel Committee on Banking Supervision (2005). Studies on the validation of internal rating systems.
+  Working Paper No. 14.
+- European Central Bank (2019). Instructions for reporting the validation results of internal models:
+  IRB Pillar I models for credit risk.
+- European Banking Authority (2017). Guidelines on PD estimation, LGD estimation and the treatment of
+  defaulted exposures (EBA/GL/2017/16).
+- DeLong, E. R., DeLong, D. M. and Clarke-Pearson, D. L. (1988). Comparing the areas under two or more
+  correlated receiver operating characteristic curves. *Biometrics* 44(3).
+- Spiegelhalter, D. J. (1986). Probabilistic prediction in patient management and clinical trials.
+  *Statistics in Medicine* 5(5).
+- Tasche, D. (2003). A traffic lights approach to PD validation. arXiv:cond-mat/0305038.
+- Tasche, D. (2013). The art of probability-of-default curve calibration. *Journal of Credit Risk*
+  9(4). arXiv:1212.3716.
+- Pluto, K. and Tasche, D. (2005). Thinking positively. *Risk*, August 2005. Longer version:
+  arXiv:cond-mat/0411699.
+- van der Burgt, M. (2008). Calibrating low-default portfolios, using the cumulative accuracy profile.
+  *Journal of Risk Model Validation* 1(4).
+- Vasicek, O. (2002). The distribution of loan portfolio value. *Risk*, December 2002.
+- Siddiqi, N. (2006). *Credit Risk Scorecards*. Wiley.
+
+## Development
+
+```bash
+uv sync
+uv run pytest
+uv run ruff check . && uv run ruff format --check . && uv run mypy src
+```
+
+## Contributing
+
+Issues and pull requests are welcome. See [CONTRIBUTING.md](CONTRIBUTING.md).
+
+## License
+
+Apache-2.0. See [LICENSE](LICENSE) and [NOTICE](NOTICE).

eqlx_credit-0.2.0/README.md

@@ -0,0 +1,177 @@
+# eqlx-credit
+
+Open tools for credit-risk model work: discriminatory power with confidence intervals, PD back-testing
+that allows for correlated defaults, cohort default rates, calibration, master scales, low-default
+portfolio methods and the Basel IRB risk-weight functions.
+
+Built by [eqlx](https://eqlx.ai) from public regulation and published research. Part of
+[eqlx.org](https://eqlx.org).
+
+> Status: alpha (0.2). Every function is tested against a closed form, a published table or worked
+> example, a brute-force calculation, or a simulation. The API may still change.
+
+## Install
+
+```bash
+pip install git+https://github.com/eqlx-ai/eqlx-credit
+```
+
+Python 3.10+, depends only on NumPy and SciPy.
+
+## What is inside
+
+| Area | Function | What it answers | Source |
+|---|---|---|---|
+| Discrimination | `auc`, `gini`, `ks`, `auc_from_counts` | Does the model rank defaulters above non-defaulters? | |
+| | `auc_ci`, `auc_ci_from_counts` | How precise is that AUC? (DeLong standard error) | DeLong et al. (1988) |
+| | `auc_decline_test` | Has the AUC fallen significantly since initial validation? | ECB validation reporting instructions (2019) |
+| PD back-testing | `jeffreys_test` | Is each grade's PD consistent with its defaults? | ECB validation reporting instructions (2019) |
+| | `binomial_test(..., rho=)` | The same, optionally allowing for correlated defaults | BCBS WP14 (2005), Vasicek |
+| | `traffic_light` | Green / yellow / red per grade at thresholds you set | Tasche (2003) |
+| | `hosmer_lemeshow` | Are the PDs right across all grades at once? | |
+| | `normal_test` | Are the PDs right across several years? | BCBS WP14 (2005) |
+| | `spiegelhalter` | Are obligor-level PDs right? | Spiegelhalter (1986) |
+| Default rates | `cohort_default_rates`, `long_run_average` | One-year default rates per cohort and their long-run average | EBA/GL/2017/16 |
+| Stability | `psi`, `hhi(..., exposure=)` | Has the portfolio moved? Is it concentrated (by count or exposure)? | Siddiqi (2006) |
+| Calibration | `anchor_to_central_tendency` | Shift PDs to a target average, keeping the ranking | |
+| | `fit_ct_ar`, `grade_positions` | Grade PDs from a central tendency and an accuracy ratio | Tasche (2013) |
+| | `apply_pd_floor` | Regulatory PD floor | Basel II, CRR, Basel III |
+| Low-default portfolios | `pluto_tasche` | Most prudent PD upper bounds, independent or correlated defaults | Pluto & Tasche (2005) |
+| | `van_der_burgt` | Grade PDs from a fitted CAP curve | van der Burgt (2008) |
+| Master scale | `geometric_master_scale`, `master_scale_from_midpoints` | The PD-to-grade ladder, with a separate defaulted grade | |
+| Capital | `risk_weight`, `capital_requirement`, `asset_correlation` | Basel IRB risk weights: corporate (with SME adjustment and maturity), mortgage, QRRE, other retail | Basel II ¶272–330, Annex 5 |
+
+Conventions: grades run from lowest to highest risk; by default a higher score means higher risk
+(`higher_is_riskier=False` for scorecards where a high score is safe); `1` in a default flag means
+default; a PD of 1 maps to the master scale's defaulted grade, never to a performing grade.
+
+## Agent skill: annual PD validation
+
+[`skills/annual-pd-validation`](skills/annual-pd-validation) is an Agent Skill that lets an AI agent prepare the
+evidence for an annual PD validation: it runs every test through eqlx-credit, reads the results, and drafts the
+report in the user's language. The agent never computes a number itself and never gives the validation opinion; the
+conclusion and signature stay with the validator. On the bundled synthetic portfolio it finds the planted problems:
+a significant AUC decline since initial validation and one grade with far more defaults than its PD implies.
+
+## An annual validation pass
+
+[`examples/validation_report.py`](examples/validation_report.py), on a synthetic grade table:
+
+```python
+import numpy as np
+import eqlx_credit as ec
+
+n = np.array([820, 1450, 1910, 1320, 640, 210])  # obligors per grade at the start of the year
+d = np.array([1, 4, 11, 19, 21, 17])  # defaults during the year
+pd = np.array([0.0012, 0.0035, 0.0070, 0.0140, 0.0300, 0.0700])
+
+cur = ec.auc_ci_from_counts(n, d)  # AUC with DeLong confidence interval
+ec.auc_decline_test(0.80, cur)  # vs the AUC at initial validation
+ec.jeffreys_test(n, d, pd).rows()  # one dict per grade, ready for a report table
+ec.traffic_light(n, d, pd, rho=0.12).colours  # allowing for correlated defaults
+ec.risk_weight(pd, 0.45)  # Basel IRB, corporate, LGD 45%, M 2.5
+```
+
+```text
+AUC 0.785 (95% CI 0.734-0.836), Gini 0.570
+Decline vs initial 0.800: S = 0.57, p = 0.285
+grade 1:   1 defaults vs   1.0 expected, Jeffreys p = 0.421, traffic light green
+grade 2:   4 defaults vs   5.1 expected, Jeffreys p = 0.662, traffic light green
+grade 3:  11 defaults vs  13.4 expected, Jeffreys p = 0.734, traffic light green
+grade 4:  19 defaults vs  18.5 expected, Jeffreys p = 0.437, traffic light green
+grade 5:  21 defaults vs  19.2 expected, Jeffreys p = 0.327, traffic light green
+grade 6:  17 defaults vs  14.7 expected, Jeffreys p = 0.259, traffic light green
+Normal test over 5 years: z = 0.89
+Risk weights: 33.0% 58.8% 80.5% 103.4% 128.4% 168.9%
+```
+
+## A low-default portfolio
+
+[`examples/quickstart.py`](examples/quickstart.py):
+
+```python
+n_obligors = np.array([120, 340, 510, 430, 260, 90])
+n_defaults = np.array([0, 0, 1, 2, 3, 2])
+
+ec.pluto_tasche(n_obligors, n_defaults, confidence=0.9, rho=0.12)
+ec.fit_ct_ar(n_obligors, central_tendency=0.015, accuracy_ratio=0.65).pd
+ec.van_der_burgt(n_obligors, central_tendency=0.015, accuracy_ratio=0.65).pd
+```
+
+```text
+Pluto-Tasche (90%, rho=0.12): [ 2.511  2.652  3.172  4.263  6.336 10.761] %
+CT/AR curve:                  [ 0.037  0.135  0.421  1.205  3.383 10.692] %
+van der Burgt:                [0.044 0.093 0.366 1.525 4.246 7.134] %
+Master scale grades:          [ 2  5  8 11 14 17]
+```
+
+## How it is tested
+
+- **Basel IRB:** all eight columns of Basel II Annex 5 ("Illustrative IRB Risk Weights") reproduced to
+  the published two decimals.
+- **Pluto–Tasche:** the paper's worked example (0.29%, 0.33%, 0.76%).
+- **DeLong:** against an explicit obligor-by-obligor placement calculation, and by simulation: the
+  standard error matches the spread of simulated AUCs and the 95% interval covers the true AUC about
+  95% of the time.
+- **Correlated binomial:** against a Monte Carlo simulation of the one-factor model.
+- **Spiegelhalter:** a hand calculation, and standard normal under correct PDs by simulation.
+- **Cohorts:** hand-built panels, including the horizon boundary and 29 February.
+
+## Notes on the methods
+
+- Use the obligor-average PD at the start of the period per grade as the grade PD in back-tests.
+- `binomial_test` with `rho=0` assumes independent defaults and rejects too often when defaults are
+  correlated; pass an asset correlation, or read it next to `traffic_light(..., rho=)`.
+- Thresholds (test levels, traffic-light quantiles, PSI readings) are policy choices; set your own.
+- `hosmer_lemeshow` uses `K` degrees of freedom for `K` grades (out-of-sample use).
+- `pluto_tasche` is the single-period version; in practice the bounds are often rescaled to the central
+  tendency afterwards.
+- `fit_ct_ar` uses Tasche's robust-logit grade positions by default but matches the accuracy ratio
+  exactly on the grade distribution rather than through his moment approximation;
+  `placement="even"` gives the v0.1 behaviour.
+- `van_der_burgt` returns each grade's PD as the average slope of the CAP curve over that grade, so the
+  weighted mean equals the central tendency exactly; grading makes the grade-level AR a little lower.
+- `risk_weight` defaults to no 1.06 scaling factor (Basel III final); pass `scaling=1.06` for Basel II /
+  CRR. PD floors differ by framework and are the caller's choice.
+
+## References
+
+- Basel Committee on Banking Supervision (2006). International Convergence of Capital Measurement and
+  Capital Standards, ¶272–330 and Annex 5.
+- Basel Committee on Banking Supervision (2005). An Explanatory Note on the Basel II IRB Risk Weight
+  Functions.
+- Basel Committee on Banking Supervision (2005). Studies on the validation of internal rating systems.
+  Working Paper No. 14.
+- European Central Bank (2019). Instructions for reporting the validation results of internal models:
+  IRB Pillar I models for credit risk.
+- European Banking Authority (2017). Guidelines on PD estimation, LGD estimation and the treatment of
+  defaulted exposures (EBA/GL/2017/16).
+- DeLong, E. R., DeLong, D. M. and Clarke-Pearson, D. L. (1988). Comparing the areas under two or more
+  correlated receiver operating characteristic curves. *Biometrics* 44(3).
+- Spiegelhalter, D. J. (1986). Probabilistic prediction in patient management and clinical trials.
+  *Statistics in Medicine* 5(5).
+- Tasche, D. (2003). A traffic lights approach to PD validation. arXiv:cond-mat/0305038.
+- Tasche, D. (2013). The art of probability-of-default curve calibration. *Journal of Credit Risk*
+  9(4). arXiv:1212.3716.
+- Pluto, K. and Tasche, D. (2005). Thinking positively. *Risk*, August 2005. Longer version:
+  arXiv:cond-mat/0411699.
+- van der Burgt, M. (2008). Calibrating low-default portfolios, using the cumulative accuracy profile.
+  *Journal of Risk Model Validation* 1(4).
+- Vasicek, O. (2002). The distribution of loan portfolio value. *Risk*, December 2002.
+- Siddiqi, N. (2006). *Credit Risk Scorecards*. Wiley.
+
+## Development
+
+```bash
+uv sync
+uv run pytest
+uv run ruff check . && uv run ruff format --check . && uv run mypy src
+```
+
+## Contributing
+
+Issues and pull requests are welcome. See [CONTRIBUTING.md](CONTRIBUTING.md).
+
+## License
+
+Apache-2.0. See [LICENSE](LICENSE) and [NOTICE](NOTICE).

eqlx_credit-0.2.0/pyproject.toml

@@ -0,0 +1,76 @@
+[project]
+name = "eqlx-credit"
+version = "0.2.0"
+description = "Open tools for credit-risk model work: PD validation tests, calibration, master scales and low-default portfolio methods."
+readme = "README.md"
+requires-python = ">=3.10"
+license = "Apache-2.0"
+license-files = ["LICENSE"]
+keywords = [
+    "credit risk",
+    "probability of default",
+    "IRB",
+    "Basel",
+    "model validation",
+    "low default portfolio",
+]
+classifiers = [
+    "Development Status :: 3 - Alpha",
+    "Intended Audience :: Financial and Insurance Industry",
+    "Intended Audience :: Science/Research",
+    "Programming Language :: Python :: 3",
+    "Topic :: Office/Business :: Financial",
+    "Topic :: Scientific/Engineering :: Mathematics",
+]
+dependencies = [
+    "numpy>=1.26",
+    "scipy>=1.11",
+]
+
+[[project.authors]]
+name = "Can Demir"
+email = "can.demir@eqlx.ai"
+
+[project.urls]
+Homepage = "https://eqlx.org"
+
+[build-system]
+requires = ["uv_build>=0.12.16,<0.13.0"]
+build-backend = "uv_build"
+
+[dependency-groups]
+dev = [
+    "mypy>=2.4.1",
+    "pytest>=9.2.0",
+    "ruff>=0.17.4",
+]
+
+[tool.ruff]
+line-length = 110
+target-version = "py310"
+
+[tool.ruff.lint]
+select = [
+    "E",
+    "F",
+    "W",
+    "I",
+    "B",
+    "UP",
+    "N",
+    "SIM",
+    "RUF",
+    "NPY",
+]
+
+[tool.mypy]
+strict = true
+warn_unused_ignores = true
+
+[[tool.mypy.overrides]]
+module = ["scipy.*"]
+ignore_missing_imports = true
+
+[[tool.mypy.overrides]]
+module = ["tests.*"]
+disallow_untyped_defs = false