Model Parameters

From Open Risk Manual

Definition

Model parameters denotes a set of quantitative (numerical) attributes that a part of the definition and use of a model. Parameters may be calibrated with reference to data or be subject to explicit policy decisions. Important model parameters may become integral to the risk management process as they have significant impact on outcomes.

Examples

Examples of model parameters include

  • the set of numerical model parameters estimated (for parametric model types)
  • the choices of confidence intervals
  • other ad-hoc factors compensating for Model Risk or other uncertainties

Issues and Challenges

  • Complex and inadequately documented models may not shed adequate insight into relevant parameters (esoteric assumptions)

See Also