Creating and validating risk models [27]

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Bullet points include: Validation is a challenge Basel Committee (1999): “the area of validation will prove to be a key challenge for banking institutions in the foreseeable future” Testing and validation varies according to nature of model, but generally encompasses at least validation of: Exposure specific inputs, statistical inputs, implementation, and Model forecasts, e.g. via back-testing / benchmarking See also Kemp (2009) and Kemp (2011)

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