Model risk
Incorporating model risk management as a core discipline
Content provided by IBM and Risk.net
Data woes force dividend swaps out of Simm update
Dealers have different approaches to pricing dividend risk factors
Model risk managers eye benefits of machine learning
Ramp-up in regulatory scrutiny of model validation sees banks turn to black boxes
Regulatory blitz weakening model risk management, say banks
Smaller banks’ modelling practices under growing scrutiny, but ability to comply is stretched
Broaden your reach on model risk, quants told
Three banks say their model inventories are “a work in progress”
Inconsistent FRTB model guidance vexes dealers
Risk models pulled in opposite directions by P&L attribution test and non-modellable risk factors
Banks seek to pry open CCP black boxes
Clarity on model inputs may have averted Brexit chaos, FCMs claim
Hidden benefits of the Fed’s model validation push
Incidents such as the London Whale losses show an overhaul of model validation should be welcomed, not maligned
FRTB’s risk factor framework is more punitive than it seems
Regime’s constraints may mean risk factors drop in and out of modellability far more frequently than dealers think
The role of model risk in extreme value theory for capital adequacy
This paper studies the impact of model risk on EVT methods when determining the value-at-risk and expected shortfall.
The beginning of the end for footloose modelling
US model risk guidance has drawbacks, but is a step towards better management of model risk
US model risk rules put lions back in their cages
Impact of Federal Reserve and OCC model risk guidance is being felt well beyond US banks
Beware the hype around analytics
As energy traders make greater use of big data, lessons of the past should not be forgotten
European banks pressed to boost model risk management
US model risk management guidelines being increasingly used by banks and regulators elsewhere
Research uncovers new sources of financial model risk
Past performance of financial models is no guarantee of future success, two forthcoming papers suggest
Options for tackling model risk limited, conference hears
Greater use of models means risk "has significantly increased", says HSBC's Bhaskar
Op risk models still needed despite SMA, says regulator
Models “play an important role in quantifying risk”, says OCC's Beth Dugan
European regulators lag on model validation, top quant claims
Supervisors in mainland Europe are 'all over the map' on model validation, says Morgan Stanley's Jon Hill
Extreme value theory has hidden risks, research finds
Method for calculating capital based on sparse data can lead to additional model risk
Liquidity stress testing: a model for a portfolio of credit lines
This paper demonstrates how cash outflows due to credit lines can be modeled in a liquidity stress test.
Stress testing and model validation: application of the Bayesian approach to a credit risk portfolio
The authors of this paper develop a Bayesian-based credit risk stress-testing methodology.
The impact of model risk on capital reserves: a quantitative analysis
This paper analyzes and quantifies the idea of model risk in the environment of internal model building.
Anatomy of a model: Valuation of physical assets
Quant ideas paper dissects layers of valuation models for physical assets
Time to see models and shocks for what they are
Market shocks are earthquakes, not a game of roulette