Model risk
Can CRE credit risk models cope with hybrid working?
As US office use changes, modellers deploy judgement overlays and alternative data to keep up
Climate risk overlays unnerve model-validation teams
Risk Live: Model risk managers fear they lack the data or skills to properly test expert judgement
Party’s over as more banks drop internal models for market risk
At least three systemic banks in Europe intend to ditch IMA for capital requirements
Generative AI is changing debate on explainability, says Deutsche
Innovation head says observability can aid regulatory acceptance
Filling the gaps in Basel’s interest rate risk measures
Reverse stress-testing or VAR may work better than existing outlier tests, but are hard to manage
FCA warns on third-party risk management for AI projects
UK regulator keeping close eye on use of cloud and vendor partnerships to develop new models
A new automated model validation tool for financial institutions
The authors put forward a novel automated validation tool, based on US Federal Reserve and Office of the Comptroller of the Currency regulatory guidance, which is used to to validate predictive models for financial organizations.
Op risk data: UBS lands $380m Archegos loss
Also: BofA billed for bilking customers; red faces over Deutsche greenwashing. Data by ORX News
BoE model risk rule may drive real-time monitoring of AI
New rule requires banks to rerun performance tests on models that recalibrate dynamically
Banks’ internal watchdogs bark back at ChatGPT
Generative AI has plenty of uses in finance, but banks must first overcome compliance headaches
Banks begin tackling climate stress tests of trading books
Market risk professionals see major shortcomings in available scenarios
Partial relief for synthetic securitisation in final EU rules
Internal model banks will see punitive multiplier reduced, but standardised banks miss out
New BoE rules could force banks to cull multiplying models
Risk Live: Model risk management to become more labour-intensive, as model definition is broadened
Bayesian backtesting for counterparty risk models
Utilising Bayesian methods, the authors put forward a new means for counterparty risk model backtesting which is both simple to implement and conceptually sound.
Risk modellers navigate fearful new world of depositor behaviour
Silicon Valley Bank suffered fastest bank run in history, but how should others respond?
Model risk management is evolving: regulation, volatility, machine learning and AI
Thomas Oliver, head of model validation at Quantifi, explores how the model risk management (MRM) landscape is changing in response to geopolitical uncertainty, increased concerns over counterparty risk, rising interest rates and other related challenges
Op risk data: Stanford fraud haunts banks for billions
Also: Helaba’s crank capital relief; TSE stock price sanction; 1MDB mauls Mudabala. Data by ORX News
US credit risk modellers prepare for life after IRB
Stress tests and economic capital calculations may not carry the same weight as Basel ratio
Bot’s job? Quants question AI’s model validation powers
But supervisors cautiously welcome next-gen model risk management
EBA: more climate risk supervisory reporting is coming
Official anticipates effort to identify climate impact on internal models, concentration risk
As interest rates surge, bankers fret over last year’s models
IRRBB modellers trying to predict client behaviour have little relevant data to fall back on
Model risk in mortality-linked contingent claims pricing
The authors investigate the influence of model risk on pricing life products and demonstrate that classical Lee-Carter-type models can be less accurate than the proposed model.
Quantification of model risk with an application to probability of default estimation and stress testing for a large corporate portfolio
This paper discusses the building of obligor-level rather than segment-level hazard rate corporate probability of default models for stress testing.