Technical paper/Model validation
The impact of deterioration in rating-model discriminatory power on expected losses
The authors propose a means to estimate the effects on a portfolio’s expected credit loss created by underwriting model risks.
A study of China’s financial market risks in the context of Covid-19, based on a rolling generalized autoregressive score model using the asymmetric Laplace distribution
Financial distress prediction with optimal decision trees based on the optimal sampling probability
A new automated model validation tool for financial institutions
A modified hybrid feature-selection method based on a filter and wrapper approach for credit risk forecasting
This paper proposes the chi-squared with recursive feature elimination method: a means of feature-selection which aims to improve classification performance using fewer features.
The validation of different systemic risk measurement models
The authors incorporate a capital buffer to the DebtRank model and use data from China's banking industry to compare the proposed model with others.
Performance validation of representative sample-balancing methods in loan credit-scoring scenarios
The authors validate 12 of the most representative sample-balancing methods used for credit-scoring models, finding that a combined SMOTE and Editor Nearest Neighbor method is optimal.
Quantification of model risk with an application to probability of default estimation and stress testing for a large corporate portfolio
This paper discusses the building of obligor-level rather than segment-level hazard rate corporate probability of default models for stress testing.
General bounds on the area under the receiver operating characteristic curve and other performance measures when only a single sensitivity and specificity point is known
Using a single true positive - true negative pair, the author shows how to calculate the area under a ROC curve.
Predicting financial distress of Chinese listed companies using a novel hybrid model framework with an imbalanced-data perspective
In this paper a novel hybrid model framework is constructed to solve the problem of predicting the financial distress of Chinese listed companies using imbalanced data.
Evaluation of backtesting techniques on risk models with different horizons
In this study different value-at-risk (VaR) models are analyzed under different estimation approaches (filtered historical simulation, extreme value theory and Monte Carlo simulation) and backtested with different techniques.
Benchmarking operational risk stress testing models
This paper outlines several approaches to benchmarking operational loss projections under stressed scenarios using both accounting metrics and historical loss experience.
Validation of index and benchmark assignment: adequacy of capturing tail risk
This paper provides practical recommendations for the validation of risk models under the Targeted Review of Internal Models (TRIM).
Optimal allocation of model risk appetite and validation threshold in the Solvency II framework
In this paper, the authors derive an analytical solution for sub-SCR VTs starting with a model risk appetite (MRA) that defines acceptable errors for an insurer’s total SCR.
Evaluating the risk performance of online peer-to-peer lending platforms in China
The objective of this paper is to select effective risk indicators and thus establish a risk index system of P2P platforms so as to evaluate the risk performance of these platforms in China.
Underperforming performance measures? A review of measures for loss given default models
This paper reviews the ways of measuring the performance of LGD models that have been previously used in the literature and also suggests some new measures.
A central limit theorem formulation for empirical bootstrap value-at-risk
In this paper, the importance of the empirical bootstrap (EB) in assessing minimal operational risk capital is discussed, and an alternative way of estimating minimal operational risk capital using a central limit theorem (CLT) formulation is presented.
Bayesian analysis in an aggregate loss model: validation of the structure functions
This paper considers the empirical evaluation of a collective risk model with the geometric as the primary distribution and the exponential as the secondary distribution.
The use of the triangular approximation for some complicated risk measurement calculations
The author introduces the triangular approximation to the normal distribution in order to extract closed- and semi-closed-form solutions that are useful in risk measurement calculations.
A practical maturity assessment method for model risk management in banks
This paper proposes a qualitative method to assess the maturity of model risk management practices within banks.
Modeling impacts of stock jumps on real estate investment trust returns with application to value-at-risk
This paper aims to model the impact of extreme stock jumps on REIT returns.
Goodness-of-fit for discrete-choice models of borrower default
This paper demonstrates that the rank-order tests are unreliable for assessing models to be used to predict probabilities.
On modeling zero-inflated insurance data
The authors of this paper use power series distributions to develop a novel and flexible zero-inflated Bayesian methodology.
Testing interest rate models for Solvency II applications
Alexey Botvinnik and Vladimir Ostrovski propose a validation method for interest rate models