My bank has a retail credit portfolio of 100 million in loans. I know the payment history,balance history of all these loans since inception. Are there any tools to calculate an expected loss, a loss distribution either at the loan level or at the portfolio level from the interest charged?
My thinking is that a higher interest charged relates to a higher expected loss qualitatively. What I want to do is reverse engineer the expected loss based on the interest and see if the number matches with the official numbers from the Group Risk folks.