Journal of Risk Model Validation

Steve Satchell

University of Cambridge

I am delighted to write the first editorial for the launch issue of The Journal of Risk Model Validation. I hope that it will be followed by many more. This issue has been put together by myself, the Editorial Board, who have been highly professional in implementation and scholarly in judgement, and Ms Lucie Carter from Risk Journals, our professional Editorial Assistant. I would like to thank Lucie and the Board for working so hard to bring this to fruition. I would also like to thank Dr George Christodoulakis for first suggesting the idea of this journal to me.

I am delighted to write the first editorial for the launch issue of The Journal of Risk Model Validation. I hope that it will be followed by many more. This issue has been put together by myself, the Editorial Board, who have been highly professional in implementation and scholarly in judgement, and Ms Lucie Carter from Risk Journals, our professional Editorial Assistant. I would like to thank Lucie and the Board for working so hard to bring this to fruition. I would also like to thank Dr George Christodoulakis for first suggesting the idea of this journal to me.

It may not strike the wider audience that there is a need for a journal with this title; however, there is a rather urgent requirement to test and validate risk models that has been brought about by a recent growth in risk management. This crosses a number of fields, such as financial markets, personal finance and, more generally, credit. Whilst there seems to be a lot of research in this area, it is somewhat disparate and it is hoped that this journal will become a research centre and an outlet for quality research articles. I hope this journal will be read by academics, risk managers, regulators and others who might find the problems, and solutions, to be intrinsically intellectually interesting.

This first issue contains a strong collection of four research papers and the following titles reflect the diversity within this new area: they are “Temporal dependence in multi-step density forecasting models” by Kevin Dowd, “The distribution of defaults and Bayesian model validation” by Douglas W. Dwyer, “Stress-testing credit risk parameters: an application to retail loan portfolios” by Daniel Rösch and Harald Scheule, and lastly “Benchmarking default prediction models: pitfalls and remedies in model validation” by Roger M. Stein. Among other issues to consider, we present research on stress testing, benchmarking, Bayesian approaches and multi-period issues. There are very few post-graduate courses in risk management; all tend to be new, many have by necessity been hastily assembled and few of them would contain detailed analysis in the above topics. This wide spread of topics is pleasing for the opening issue of the journal; hopefully, it will attract a wide readership. As we mature, we hope to include special issues on aspects of validation that are relevant and important;we welcome advice and collaboration from readers and contributors.