List of Model Validation Questions

List of Model Validation Questions

Model Validation is a varied exercise and the precise elements involved depend significantly on the nature of the models being validated, the context and importance of Model Usage. The following list is a general blueprint.

Evaluate the Model Governance context

• Does the organization have a Model Governance framework? If not, what is applicable Internal Governance?
• Has the model been commisioned, developed and operated internally in accordance with that framework.
• What are the regulatory requirements (if any)

Evaluate the Model Development context

• The sourcing of data: Are the data used to built and/or operate the model comprehensive, with appropriate Data Quality, without bias?
• Is the concept / mathematical structure of the model well known and understood (e.g in literature)
• How much Intrinsic Model Risk is there (alternative possible models, hidden assumptions)
• Are there explicit quality requirements required before a model is accepted
• Is there benchmarking with alternative models
• Is there backtesting against historical data (when applicable)

Establish the Model Usage context

• Is the model documented appropriately
• Are users aware of potential weaknesses
• Is the Model Performance being monitored appropriately?
• Are instances of Model Failure, Overrides, recalibrations or adjustments documented and fed back into model redevelopment?
• Is there a process of Periodic Validation