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
Top 10 op risks 2015: model risk
Avoiding model failure will be a key issue in 2015
Black box blues: Fed starts model validation row
"They all fall short," says one expert, as banks try to vet vendor models
Fed orders banks to break open black boxes
Banks struggling to prise information out of vendors after Fed clamps down
Hedge backtesting for model validation
Derivatives pricing and expected exposure models must be backtested as a basic regulatory requirement. But what does this mean exactly, and how can it be used to reserve against model risk? Lee Jackson introduces a general backtesting framework for…
Portfolio optimisation via replication
Filippo Della Casa and Michele Gaffo propose a new framework to run portfolio optimisation for life insurance business, by exporting the replicating portfolio technique from risk management to investment management. In particular, they develop a new risk…
Applied risk management series: Integrating stress tests with risk management
Stress testing is a vital part of successful risk management, but risk managers at energy trading firms frequently face obstacles in designing and implementing successful stress testing programmes. In this article, Carlos Blanco provides some advice on…
Risk managers too focused on model outputs, Lloyd’s risk head says
Risk managers need to look beyond models and consider a wider universe of risks, says Reeves