Delinquency, Default, and Loss Analysis 65
FIGURE 4.4 Raw loss data is best presented on a static loss basis.
FIGURE 4.5 The raw loss data should be converted to percentages of original
vintage balance.
prevents inaccurate loss percentages that could occur if the loss percentage was
calculated in a dynamic manner. Standard & Poor’s provides excellent reasoning on
why static loss data is preferred:
An analysis of static pool data is preferred, since it demonstrates loss
performance over the full liquidation period of a pool. Static pool data also
can provide insight into changing portfolio characteristics, underwriting, or
collection policies. Movement in such variables may not be readily apparent
in dynamic portfolio data because of the constantly changing mix in new and
aged receivables. Additionally, data based on annual losses can understate
