Model risk
HSBC hires new head of model validation
Bank appoints Credit Suisse veteran to key role
BNPP, Credit Suisse, State Street incur VAR breaches
BNP Paribas capital multiplier increases on seventh breach in nine months
The disputed terrain of model risk scoring
There is no concord on how banks should police their model risk. But two Fed economists have an idea
Fed’s Brainard wary of black box AI models in consumer credit
Speech raises explainability issue; says existing model risk guidelines are “a good place to start” in regulating AI
Machine learning hits explainability barrier
Banks hire AI industry experts in face of growing regulatory scrutiny
National supervisors put pressure on global risk models
Varied supervisory and external audit demands stretch cross-border risk management
Compliance preparations amid uncertain rules
A forum of industry leaders discusses how banks will define individual trading desks under FRTB, whether BCBS 239 compliance projects can help banks meet FRTB risk data challenges, which model validation obstacles banks still face and other key topics
Finally, a professional group for model-risk managers
As models of all stripes crowd into finance, the people who screen them form an association
Procyclicality of capital and portfolio segmentation in the advanced internal ratings-based framework: an application to mortgage portfolios
This paper investigates the procyclicality of capital in the advanced internal ratings based (A-IRB) Basel approach for retail portfolios, and identifies the fundamental assumptions required for stable A-IRB risk weights over the economic cycle.
Bermudan swaption model risk analysis: a local volatility approach
This paper seeks to contribute a simple and (almost) model-free way of assessing the economic value of the Bermudan exercise right derived from a “minimal” local volatility enhanced interest rate model.
Optimal allocation of model risk appetite and validation threshold in the Solvency II framework
In this paper, the authors derive an analytical solution for sub-SCR VTs starting with a model risk appetite (MRA) that defines acceptable errors for an insurer’s total SCR.
BNP Paribas VAR breaches trigger capital hike
French bank's IHC reports four backtesting exceptions
Fed stress tests: foreign banks lag US on capital estimates
On average, IHCs missed the Fed’s estimates of the amount their CET1 ratios would fall in the 2018 test cycle by 213bp, compared with 109bp by US lenders
New backtests for unconditional coverage of expected shortfall
In this paper, the authors present a new backtest for the unconditional coverage property of expected shortfall.
OCC stands by margin model as regulators investigate
As watchdogs probe Q1 breaches, CCP executives insist margin models worked as intended
Barclays, Credit Suisse stress test estimates stray from Fed’s
The two banks miss the mark on stressed capital ratio by 290bp and 460bp, respectively
Tired of overshooting, BNY Mellon revamps stress test model
Capital distributions crimped by conservative CCAR estimates
Regulators need to adopt AI for monitoring, experts say
Growing bank usage of artificial intelligence means authorities must hasten adoption themselves
Model risk in the transition to risk-free rates
Transition is an opportunity to reduce multi-rate complexities, say Bakkar and Brigo
Banks should quantify loan-loss model risk – academic
Models such as those used for IFRS 9, CECL or CCAR are prone to errors, and should be accounted for
BoE: UK banks falling short on stress-test model risk
Recent guidance on stress-test models could be expanded, says BoE exec
AI models prompt banks to strengthen governance
Risk managers want ‘transparency and clarity’ around AI-based models
Bank of America and BNY Mellon suffer VAR breaches
Trading losses exceeded estimates on a single day at each dealer in the first quarter
Sponsored video: Thomas Lee, Vivo Security
Thomas Lee, chief executive and co-founder of Vivo Security – a start-up firm based in Silicon Valley and sponsors at OpRisk North America – talks about how special the banking industry is to Vivo Security and why its approach to model risk management…