Abstract
Validators should ensure that all model components and the related outputs have been thoroughly tested. Let us recall that the first of the BCBS (2005) validation principles is that “Validation is fundamentally about assessing the predictive ability of a bank’s risk estimates and the use of ratings in the credit process.” We will follow Tasche (2008) in interpreting this somewhat vague requirement as meaning that validators should examine PD models’ performance in terms of their discriminatory power and calibration.
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© 2016 Sergio Scandizzo
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Scandizzo, S. (2016). Probability of Default Models. In: The Validation of Risk Models. Applied Quantitative Finance series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137436962_5
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DOI: https://doi.org/10.1057/9781137436962_5
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