Case Study: Federal Home Loan Bank of Indiana achieves robust portfolio credit‑risk quantification and VaR insights with Palisade's @RISK

Federal Home Loan Bank of Indiana - Customer Case Study

The Federal Home Loan Bank of Indiana (FHLBI) faced the challenge of quantifying credit risk across loan portfolios where defaults and collateral values are highly interdependent. To model joint defaults, correlated collateral behavior, and the PD x LGD x EAD framework while also assessing market/interest-rate sensitivity, FHLBI used Palisade’s @RISK to build a robust, correlation-aware portfolio credit risk model.

Palisade’s @RISK enabled FHLBI to run correlated Monte Carlo simulations (using correlated Bernoulli trials and fitted collateral return distributions) that produce loss distributions, Value‑at‑Risk metrics, gross and net loss outputs, and tornado charts for sensitivity analysis. The solution gave FHLBI measurable outputs—VaR numbers and identified drivers of individual and group default risk—while allowing comprehensive stress testing and what‑if analysis, improving the bank’s ability to quantify and manage portfolio credit exposure.

Federal Home Loan Bank of Indiana

Brendan McGrath

Director of Credit Risk Analysis, Enterprise Risk Management