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Model Validation March 7, 2007

Posted by riskopedia in Basel II, EAD, LGD, Model Validation, PD, Retail Risk.
4 comments

After all these years of Basel II, and all the talks around various methodologies. Finally there is a regconition of Model validation in the press. Sometime this year, there will be a launch of “The Journal of Risk Model Validation”, you can go to this link http://www.journalofriskmodelvalidation.com/ to find out more.

At the moment, most of the financial institutions used external validators such as various consultancy firms (e.g. Experian Scorex, FICO, Moody’s, S&P etc.) and the big 4 (KPMG, EY, PWC, Deloitte). Seemed like they don’t really have a lot of investment in internal validations. Main reason usually the company sees the “internal” thing is costly and not benefit driven. However, I think the institutions under-estimated the “internal” part and over-estimated the “external” part, for the following: (more…)

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