The Validation of Risk Models

A Handbook for Practitioners

  • Sergio¬†Scandizzo

Part of the Applied Quantitative Finance series book series (AQF)

Table of contents

  1. Front Matter
    Pages i-viii
  2. Introduction: A Model Risk Primer

    1. Sergio Scandizzo
      Pages 1-13
  3. A Framework for Risk Model Validation

    1. Front Matter
      Pages 15-15
    2. Sergio Scandizzo
      Pages 17-27
    3. Sergio Scandizzo
      Pages 28-48
  4. Credit Risk

    1. Front Matter
      Pages 49-49
    2. Sergio Scandizzo
      Pages 51-58
    3. Sergio Scandizzo
      Pages 59-77
    4. Sergio Scandizzo
      Pages 78-92
    5. Sergio Scandizzo
      Pages 93-105
  5. Market Risk

    1. Front Matter
      Pages 107-107
    2. Sergio Scandizzo
      Pages 109-126
    3. Sergio Scandizzo
      Pages 127-135
  6. Counterparty Credit Risk

    1. Front Matter
      Pages 137-137
    2. Sergio Scandizzo
      Pages 139-152
  7. Operational Risk

    1. Front Matter
      Pages 153-153
    2. Sergio Scandizzo
      Pages 155-179
  8. Pillar 2 Models

    1. Front Matter
      Pages 191-191
    2. Sergio Scandizzo
      Pages 193-204

About this book

Introduction

The practice of quantitative risk management has reached unprecedented levels of sophistication. The pricing, the assessment of risk as well as the computation of the capital requirements for highly complex transactions are performed through equally complex mathematical models, running on sophisticated computer systems, developed and operated by dedicated, highly qualified specialists. With this sophistication, however, come risks that are unpredictable, globally challenging and difficult to manage. Model risk is a prime example of these and precisely the kind of risk that those tasked with managing financial institutions as well as those overseeing the soundness and stability of the financial system should worry about.

This book starts with setting the problem of the validation of risk models within the context of banking governance and proposes a comprehensive methodological framework for the assessment of models against compliance, qualitative and quantitative benchmarks. It provides a comprehensive guide to the tools and techniques required for the qualitative and quantitative validation of the key categories of risk models and introduces a practical methodology for the measurement of the resulting model risk and its translation into prudent adjustments to capital requirements and other estimates.

Keywords

risk management bank governance credit risk market risk operational risk risk models bank banking Credit Risk derivatives Hedging Risk Management

Authors and affiliations

  • Sergio¬†Scandizzo
    • 1
  1. 1.European Investment BankLuxembourg

Bibliographic information

  • DOI https://doi.org/10.1057/9781137436962
  • Copyright Information The Editor(s) (if applicable) and The Author(s) 2016
  • Publisher Name Palgrave Macmillan, London
  • eBook Packages Economics and Finance
  • Print ISBN 978-1-137-43695-5
  • Online ISBN 978-1-137-43696-2
  • About this book