European regulators lag on model validation, top quant claims

businessmen-sharing-thoughts — Model validators should not answer certain types of questions from developers

Steve Marlin
10 Feb 2016

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European regulators are lagging their US and UK counterparts in ensuring that quantitative models are subject to independent validation, a senior quant has claimed.

US regulators require banks to independently validate all capital models – and it is generally considered good practice to do this for all models used for risk management, finance and accounting purposes.

Models should be validated by a team that is completely independent from the model developers, but the lines of separation can be

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