Johnson & Wales University Risk Management Discussion

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MRM Assignment 2 Problem #1 (4 pts): Read the following draft model risk policy below. Please make 2-3 suggestions on how to improve the policy. Please explain the reasoning behind your suggestions. (Hint: Compare against the policy requirements found in Lecture 5) Sample MRM Policy Purpose: This policy is meant to provide the primary objectives of the Model Risk Management for the bank. It is also meant to provide clear definitions on model and model risk and give clear rules on how model satisfies compliance to the MRM policy. This includes requirements for vendor models. This policy defines a model as quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories, techniques, and assumptions to process input data into quantitative estimates. Model Risk is assessed via the measurements of certain KRIs and KCIs in the Model Lifecycle to ensure that model risk is always within the risk appetite set by the BoD. The BoD delegates the overall management of model risk to the Model Risk Management (MRM) department inside the firm. The head of MRM will report into the CRO. Organizational Structure: Business Units are deemed as principal model owners and are responsible for the 1st LoD duties such as proper development and use of the models. Model Developers share this responsibility with the Business Units. Independent Model Validation Team is responsible for the 2nd LoD duty of the validation control process. The Independent Model Validation Team must give an ‘approve’ or ‘reject’ outcome to each validation exercise. All models are expected to be validated for initial use and re-validated annually for continued use. All models must be registered in the bank’s model inventory system. Problem #2 (3 pts): Please take a look at the following risks: • • Documentation Risk – Model document is not sufficiently complete. Model Theory Risk – The model is not conceptually sound. Now look at the following processes: Model Development Process Model Validation Process • • For each process, define appropriate controls for the above risks and place ‘control points’ (places in the processes where a specific control can be assessed). You can mark them as circles on the connector lines in the diagrams above. Explain how the controls and their respective control points help to manage the identified model risk. Risk Management Actions In the lectures that follow, we will map the MRM areas to the Risk Management Sequence and Actions. One should notice that each action is not isolated but is iterative upon other risk management actions. 9 Themes of 3 Lines 2nd LoD – Effective Challenge • The 2nd LoD is the independent risk function.第二个 LoD 是独立的风险函 数。 • Effective Challenge is the key theme for the 2nd LoD. Model Validation is a key activity where ‘Effective Challenge’ should be implemented.有效挑战 是第二届LoD的关键主题。 模型验证是应该实施“有效挑战”的关键活动。 • However, Effective Challenge should be used in 2nd LoD for all of its activities. Effective Challenge is seen in the context of the MRM Framework of attempting to quantify, measure, and mitigate model risk.但 是,有效挑战应在第二LoD中用于其所有活动。 有效挑战是在尝试量化、 衡量和缓解模型风险的 MRM 框架的上下文中看到的。 • At a typical financial firm, the MRM function, as in-line with its Operational Risk nature, sits in the 2nd LoD Risk management function. 在典型的金融公司,MRM 职能与其运营风险性质一致,位于第二大银行风险 12 管理职能中。 Themes of 3 Lines 3rd LoD – Confirmation • The 3rd LoD is responsible for confirming the effectiveness and the completeness of the processes in the 1st and 2nd LoDs. • 第 3 个 LoD 负责确认第 1 个和第 2 个 LoD 中流程的有效性和完整性。 • Confirmation is the key theme for the 3rd line. The 3rd LoD performs general or targeted reviews of the 1st and 2nd LoD processes and controls in order to confirm these processes and controls are effective and do not have any material gaps. •确认是第三行的关键主题。 第3个LoD对第1和第 2个LoD过程和控制进行一般或有针对性的审查,以确认这些过程和控制是 有效的,并且没有任何材料间隙。 13 MRM framework coverage Key steps 1st LoD 2nd LoD 3rd LoD Establish MRM policy and governance structure独立风险 • Defines what model and model risk is • Clearly defines roles and responsibilities for all LoDs • Creates a framework for model validation Create Model Inventory • Identify models across the enterprise based on model definition • Capture critical model information such as intended and actual use Perform model risk assessment • Assess models, recognizing the different levels of inherent risk • Prioritize models for validation Model documentation and testing • Typically requires significant investment as documentation and testing procedures may not exist or be consistent with documentation standards Validate models • Incorporates end-to-end view of process (inputs, processing, outputs) and controls across key validation components (e.g., conceptual soundness) • Evidence of effective challenge is critical Prioritize and remediate findings • Process should be consistent with model change management framework Implement ongoing MRM procedures • Applies to models in all parts of lifecycle (i.e., includes new and existing models) • Upkeep may be less onerous than initial effort, but still requires diligence Primary Responsibility Secondary Responsibility Review Compliance 14 Model Lifecycle The model lifecycle consists of the steps in the process for building and productionizing a model in-line with the MRM framework for that firm. 15 Model Validation • Validation is the principle 2nd LoD control process to assess model risk. • 验证 是评估模型风险的第二个 LoD 控制过程。 • The validation function is a necessary requirement of Model Risk Management. 验证功能是模型风险管理的必要要求。 • Model validation, as defined by SR11-7, is ‘the set of processes and activities intended to verify that models are performing as expected, in line with their design objectives and business uses. ’根据 SR11-7 的定义,模型验证是“一组流 程和活动,旨在验证模型是否按预期运行,符合其设计目标和业务用途。' • SR11-7 and other regulatory guidance outlines the basic form of the model validation function:• SR11-7和其他监管指南概述了模型验证功能的基本形式: • It must be independent of 1st LoD; • 它必须独立于第一个 LoD; • It must provide ‘effective challenge’ of the model: ‘critical analysis by objective, informed parties that can identify model limitations and produce appropriate changes’它必须为模型提供“有效的挑战”:“由客观, 知情的各方进行批判性分析,可以识别模型的局限性并产生适当的更改”16 Model Validation Principles (BCBS) Principle 1 – Validation is fundamentally about assessing the predictive ability of a bank’s risk estimates and the use of ratings in credit processes.原 则1 - 验证基本上是关于评估银行风险评估的预测能力以及在信贷流程中使用评级。 Outcome Analysis/Backtesting is a key component of model validation.结果 分析/回溯测试是模型验证的关键组成部分。 Principle 2 – The Bank has primary responsibility for validation. The primary responsibility for validating the risk models lies within bank.原则2 – 世行对验证负有主要责任。验证风险模型的主要责任在于银行。 The bank has the primary responsibility for risk management including model risk management.银行对风险管理负有主要责任,包括模型风险管理。 Principle 3 – Validation is an iterative process.原则 3 – 验证是一个迭代过程。 17 Model Validation Principles (BCBS) Principle 4 – There is no single validation method Many well-known validation tools like back-testing, benchmarking, etc.原则4 - 没有单一的验证方 法许多众所周知的验证工具,如回溯测试,基准测试等。 Principle 5 – Validation should encompass both quantitative and qualitative elements. 原则5 – 审定应包括定量和定性要素。 Principle 6 – Validation processes and outcomes should be subject to independent review.原则6 – 审定过程和结果应接受独立审查。 18 Key Elements of Validation Evaluation of Conceptual Soundness • Evaluating the quality and extent of developmental evidence and conducting additional testing as necessary. •评估发育证据的质量和程度,并在必要时进行额外的测试。 • Assessing whether the model achieves the intended purpose. • 评估模型是否达到预期目的。 • Comparing alternative model theories and approaches. •比较替代模型理论和方法。 • Justifying the choice of a particular model theory and approach. • 证明选择特定模型理论和方法的 合理性。 • Assessing key assumptions and variables, with analysis of their impact on model outputs and particular focus on any potential limitations, including model transparency and explainability for AI approaches. •评估关键假设和变量,分析它们对模型输出的影响,并特别关注任何潜在的 限制,包括模型透明度和人工智能方法的可解释性。 19 Key Elements of Validation Evaluation of Conceptual Soundness概念合理性评估 • Evaluating the relevance of the data used to build the model to validate that data are reasonably representative of the model’s inputs, such as the bank’s portfolio, account activity, or market conditions, depending on the type of model. This is particularly important when a bank uses external data or the model is used for new activities. • 评估用于构建模型的数据的相关性,以验证数据是否合理 地代表了模型的输入,例如银行的投资组合、账户活动或市场状况,具体取 决于模型的类型。当银行使用外部数据或模型用于新活动时,这一点尤其重 要。 • Sensitivity analysis and stress testing.灵敏度分析和压力测试。 • Benchmarking• 基准测试 20 Key Elements of Validation Ongoing Monitoring持续监测 • Ongoing monitoring is essential to evaluate whether changes in products, exposures, activities, clients, or market conditions necessitate adjustment, redevelopment, or replacement of the model, and to verify that any extension of the model beyond its original scope is valid. • 持续监控对于评 估产品、风险、活动、客户或市场条件的变化是否需要调整、重新开发或更 换模型,以及验证模型超出其原始范围的任何扩展是否有效至关重要。 • Any model limitations identified in the development stage should be regularly assessed over time, as part of ongoing monitoring. • 作为持续监测 的一部分,在开发阶段查明的任何模式局限性都应长期定期评估。 • Monitoring begins when a model is first implemented in production systems for actual business use. This monitoring should continue periodically over time, with a frequency appropriate to the nature of the model, the availability of new data or modeling approaches, and the magnitude of the risk involved• 当模型首次在生产系统中实现以供实际业务使用时,监视就开 始了。这种监测应随着时间的推移定期进行,其频率应适合模型的性质、新 21 数据或建模方法的可用性以及所涉及的风险程度。 Key Elements of Validation Outcomes Analysis成果分析 • Outcomes analysis is the comparison of model outputs to corresponding actual outcomes. •结果分析是模型输出与相应实际结果的比较。 • The precise nature of the comparison depends on the objectives of a model, and might include an assessment of the accuracy of estimates or forecasts, an evaluation of rank-ordering ability, or other appropriate tests. • 比较的确切性质取决于模型的目标,可能包括对估计或预测准确性的评估、 对排名排序能力的评估或其他适当的测试。 • A variety of quantitative and qualitative testing and analytical techniques can be used in outcomes analysis. The choice of technique should be based on the model’s methodology, its complexity, data availability, and the magnitude of potential model risk. •各种定量和定性测试和分析技术可用于结 果分析。技术的选择应基于模型的方法、复杂性、数据可用性以及潜在模型 风险的大小。 • Back-testing is a common form of outcome analysis for statistical modeling.22 • 回溯测试是统计建模结果分析的常见形式。 Model Validation Workflow 23 Model Validation Staff • Advanced degree (Ph.D. or M.Sc.) in a mathematically based subject; •数学科目的高级学位(博士或 M.Sc);或 • High level of proficiency in programming; • 熟练掌握编程能力强; • Understanding of stochastic calculus and its practical applications in finance; • 了解随机微积分及其在金融中的实际应用; • Understanding of statistics; • 了解统计数字; • Understanding of quantitative risk management techniques. • 了解 定量风险管理技术。 24 Class Re-Cap Till Now What have a learned so far: • Model Risk has an unique definition (when compared to market risk, credit risk, etc.) • 模型风险具有独特的定义(与市场风险、 信用风险等相比) • The regulatory framework for MRM• MRM的监管框架 • MRM is most suitably managed as Operational RiskMRM 作 为运营风险进行管理最为合适 • The components that make up the MRM framework• 构成 MRM 框架的组件 • The Model Lifecycle模型生命周期 25 Putting it all together 26 So, let’s spend some time to try connect what we have learned thus far: Model Risk Management intends to identify, assess, monitor, and mitigate the exposures, likelihoods, and impacts associated with model use (both on an individual level and an aggregate level) to ensure that the tolerated model risk is within the actionable model risk appetite.模型 风险管理旨在识别、评估、监视和减轻与模型使用相关的风险、可能性和影响(在 单个级别和聚合级别),以确保容忍的模型风险在可操作模型风险偏好范围内。 This is done by using the processes and controls laid out in firm’s MRM framework.这是通过使用公司MRM框架中规定的流程和控制 来完成的。 26 Identify: Documentation Risk Documentation Risk: Lack of good and comprehensive model documentation.文档风险:缺乏良好和全面的模型文档。 All steps and results of the quantitative model development process should be documented in a transparent and comprehensive way. This includes internal governance of the development process such as business feedback and the results of 1st LoD testing.定量模型开发过程的所有步骤和结果都应 以透明和全面的方式记录下来。 这包括开发过程的内部治理,例如业务反馈和第 一次 LoD 测试的结果。 Lack of sufficient model documentation (i.e. documentation risk) may have downstream impact on various MRM processes.缺乏足够的模型文档(即文档风险)可能会对各种 MRM 流程产生 下游影响。 27 Identify: Documentation Risk Processes: • Model Development Process • Model Validation Process 过程: • 模型开发流程 • 模型验证过程 Controls: • ‘Model Owner sign-offs on documentation to attest it meets the documentation standards’ • ‘Model Documentation is assessed according to documentation standards’ 控制: • “模型所有者签署文档以证明其符合文档标准” • “根据文档标准评估模型文档” Risks: • Too many models are being developed with insufficient documentation. • Model Development process has gaps 风险: • 正在开发的模型太多,但文件不足。 • 模型开发过程存在差距 28 Assess: Documentation Risk Key steps 1st LoD 2nd LoD 3rd LoD Establish MRM policy and governance structure • Defines what model and model risk is • Clearly defines roles and responsibilities for all LoDs • Creates a framework for model validation Create Model Inventory • Defines what model and model risk is • Clearly defines roles and responsibilities for all LoDs • Creates a framework for model validation Perform model risk assessment • Assess models, recognizing the different levels of inherent risk • Prioritize models for validation Model documentation and testing • Typically requires significant investment as documentation and testing procedures may not exist or be consistent with documentation standards Validate models • Incorporates end-to-end view of process (inputs, processing, outputs) and controls across key validation components (e.g., conceptual soundness) • Evidence of effective challenge is critical Prioritize and remediate findings • Process should be consistent with model change management framework Implement ongoing MRM procedures • Applies to models in all parts of lifecycle (i.e., includes new and existing models) • Upkeep may be less onerous than initial effort, but still requires diligence Primary Responsibility Secondary Responsibility Review Compliance 29 Assess: Documentation Risk Documentation Risk should be assessed by: • 1st LoD – Model Developer and Model Owner need to accept and sign-off on the quality of the model documentation before submission to validation. • 1st LoD – 模型开发人员和模型所有者在提交验证之前需要接受并签署模型文档的质量。 • 2nd LoD – Model Validation should assess the quality of the model documentation and report on any material deficiencies in the model documentation. • 第 二章 – 模型验证应评估模型文档的质量,并报告模型文档中的任何材料缺陷。 • 3rd LoD – Review of Processes and testing of Each LoD has a part to play in managing each risk! controls.审查过程和测试 30 Monitor: Documentation Risk KCIs: • ‘Model Owner sign-offs on documentation to attest it meets the documentation standards’ 模型所有者签署文档,以证明其符合文档标 准 KCI: ‘MO Document Assessment and Sign-off’ Compliance • ‘Model Documentation is assessed according to documentation standards at model submission’ KCI:“MO 文件评估和签核”合规性 • “在提交模型时,根据文档标准评估模型文档” KCI: ‘Assessment of Documentation at model Submission’ Scorecard KCI:“模型提交时的文件评估”记分卡 KRIs: • # and % of model rejections based on insufficient documentation 基于文档不足的模型拒绝的 # 和百分比 • # of attempts required for a model document to be accepted for validation• 接受示范文件进行验证所需的尝试次数 • # of findings raised during validation related to documentation. • 在验证期间提出的与文档相关的结果数。 31 Within Risk Appetite The risk appetite could be: • Thresholds on KRI metrics; • KRI 指标的阈值; • Thresholds on # of issues;问题数量的阈值; • Number of process incidents;过程事件的数量; • A control deemed ineffective. • 被认为无效的控制措施。 32 Mitigate: Documentation Risk KRIs: • # and % of model rejections based on insufficient documentation• 基于文档不足的模型拒绝次数和百分比 • # of attempts required for a model document to be accepted for validation• 接受示范文件进行验证所需的尝试次数 Review of the documentation process/procedures during the model development phase. Review of staff qualification. Review of internal-sign off process.在模型开发阶段审查文档流程/程序。审查工作人 员的资格。 审查内部签核过程。 • # of findings raised during validation related to documentation. • 在验证期间提出的与文档相关的结果数。 Track and remediate findings related to documentation.跟踪和修正与 文档相关的结果。 33 MRM Gameplan For each identified risk: • Map each process that can be affected by that risk• 映射 可能受该风险影响的每个流程 • Identify (and create) controls• 识别(和创建)控件 • Identify KPIs/KCIs/KRIs relevant for measuring and monitoring the risk.确定与衡 量和监测风险相关的KPI/KCI/KRI 。 34 MRM Organization 3 lines of Defense Model Model Owners MRM Risk Function • Business purpose • Model Governance • Model Development • • Model Implementation Independent Model Validation • Model Operation • Model Risk Independent Monitoring • Performance Monitoring • Model Inventory • • Model Risk Reporting Model Change Management Internal Audit • Independent Review and Audit of: • 1 st Line • 2 nd Line 35 MRM Organization The Board of Directors (BoD), who are chosen by the stockholders, is responsible for the overall safety and soundness of the organization;董事会(BoD)由股东选出,负责组织的 整体安全性和健全性; Thus, board of directors is ultimately responsible for MRM;因此, 董事会最终对MRM负责; However, in financial firms, this responsibility for day-to-day is usually delegated.但是,在金融公司中,这种日常责任通常是委托的。 37 Board of Directors (BoD) Oversight • What decisions are currently being made based on these models? What decisions will be made in the future? • 目前根 据这些模式正在作出哪些决定?将来会做出哪些决定? • What is the nature of the risk with each of the models: is it, for example, financial, regulatory, reputational or customer related? • 每种模型的风险性质是什么:例如,它是否与财务、监管、声誉或 客户相关? • How are the models being redesigned, operated and/or controlled to reduce that risk?如何重新设计、操作和/或控制模型以降 低这种风险? 38 Board of Directors (BoD) Oversight • What recommendations for model improvements have been made previously? • 以前曾就模型改进提出过哪些建议? • What have the model owners done to remediate these recommendations? How long did it take them to do so?模型 所有者采取了哪些措施来修正这些建议?他们花了多长时间才这样做? • Are model owners playing “hide the model” or resisting the oversight of MRM in some other way? If so, has MRM been able to effectively escalate these areas of resistance to the RC/BOD? • 模型所有者是在玩“隐藏模型”还是以其他方式抵制对 MRM 的监督?如果是这样,MRM是否能够有效地将这些阻力区域升级到RC / BOD? 39 MRM Organization Organizational Set-up #1: MRM reports to the CRO. RC/BoD CEO CRO MRM Head CRM Head ORM Head 40 MRM Organization Organizational Set-up #1: MRM reports to the CRO. Advantages: • CRO performs daily management of risk activities. CRO对风险活动进行日常管理。 • CRO is able to see the interaction of model risks with other forms of risk. CRO能够看到模型风险与其他形式的 风险的相互作用。 Disadvantages: • CRO is responsible for other forms of risk; • CRO对其他 形式的风险负责; • CRO may see that they must prioritize actions and hence model risk may not get prioritized in a given situation. CRO可能会看到他们必须优先考虑行动,因此在给定的情 况下,模型风险可能不会被优先考虑。 41 MRM Organization Organizational Set-up #2: MRM reports to RC/BoD. RC/BoD CEO 直接汇报而不是CRO MRM Head CRO Head 42 MRM Organization Organizational Set-up #2: MRM reports to RC/BoD. Advantages: • MRM Head reports directly to the RC/BoD; • MRM负责 人直接向RC/BoD报告; • RC/BoD has ultimate responsibility to prioritize model risk as they see the need. RC/BoD负有最终责任,在 模型风险认为有必要时优先考虑它们。 Disadvantages: • RC/BoD may find the model risk reports very technical; RC / BoD可能会发现模型风险报告非常技术性; • RC/BoD may not be able to make decisions in a real-time environment. RC/BoD 可能无法在实时环境中做出决 策。 • Decisions may be too high-level.决策可能过于高层次。 43 MRM Organization Organizational Set-up #3: MRM reports to the MRC/BoD. RC/BoD CRO CEO Model Risk Committee/ BoD MRM Head Business Head 44 MRM Organization Organizational Set-up #3: MRM reports to the MRC/BoD. Advantages: • MRC/BoD has ultimate responsibility to prioritize model risk as they see the need. MRC/BoD负有最终责任, 在模型风险看到需求时确定其优先级。 • MRC/BoD will have the technical skills to assess model risk adequately. • MRC/BoD将具备充分评估模型风险的 技术技能。 Disadvantages: • MRC/BoD may not be able to make decisions in a real-time environment. MRC/BoD 可能无法在实时环境中做出 决策。 • Decisions may be too high-level. • 决策可能过于高层次。 45 MRM Organization Summary • MRM Organization must meet minimal requirements:• MRM 组织必须满足 最低要求: • Board of Directors takes ultimate responsibility for model risk management (as it does for risk management in general) • 董事会对模 型风险管理承担最终责任(就像对一般的风险管理一样) • Senior Management is involved in model risk management• 高级管理 层参与模型风险管理 • The specific MRM organizational structure may vary:• 具体的 MRM 组织结 构可能有所不同: • Each setup has advantages/disadvantages•每种设置都有优点/缺点 • Each possible structure needs to support strong communication between different levels of management and between different stakeholders. • 每个 可能的结构都需要支持不同管理层之间以及不同利益相关者之间的强有力沟 通。 46 MRM Governance What is MRM Governance? Similar to ORM Governance but tailored for managing Model 理类似,但为管理模型风险量身定制。 Risk.与ORM治 ORM Governance is a set of activities, policies and procedures which formalize operational risk management activities. ORM治理是一套使运营风险 管理活动正规化的活动,政策和程序。 MRM Governance is a set of activities, policies and procedures which formalize model-related operational risk management activities. MRM治理是 一组活动,政策和程序,使与模型相关的操作风险管理活动正规化。 Or, more simply, MRM Governance is a set of activities, policies and procedures which formalize model and model risk management activities. MRM治理是一组活动, 政策和程序,使模型和模型风险管理活动正式化。 47 MRM Governance Procedure Standard Policy 48 MRM Governance - Policy What is a Policy? Policy relates to a decision of the governing body of an organization (i.e. management intent). A policy is typically an internal organizational decision that aids how it functions. A policy is a formal statement of a principle that should be followed by its intended audience. Each policy should address an important issue concerning the achievement of the overall purpose of the organization. The policy must link with the strategic objectives.政策涉及一个组织的理事机构的决定(即 管理意图)。策略通常是有助于其功能的内部组织决策。策略是目标受众应遵循的 原则的正式声明。每项政策都应涉及一个与实现本组织总体宗旨有关的重要问题。 该政策必须与战略目标相联系。 For model risk, establishes methodology to mitigate potential risks arising from the bank's reliance on financial models and to ensure that the sources and the magnitude of the bank's model risk are understood and managed effectively. 对于模型风险,建立方法,以减轻银行依赖财务模型所产生的潜在风险,并确 保有效理解和管理银行模型风险的来源和程度。 49 MRM Governance - Policy What should a robust MRM policy contain? • Describe governance and controls over the model risk management process; • Include definitions of a model and model risk and criteria for when model risk management policies should be applied; • Describe the process for assessing model risk; • Identify roles and responsibilities of stakeholders with clear detail on expertise, authorities, reporting lines, and continuity; • Establish model risk management internal controls; • Define acceptable practices for model development, including redevelopment; implementation; use; and validation for all models, including third-party model. 50 MRM Governance - Standards What is a Standard? A standard is a formally-established requirement in regard to a process, action or configuration标准是关于流程、操作或配置的正式制定的要求 For model risk, establishes certain conformances with respect to certain elements to the MRM function.对于模型风险,建立与 MRM 函数的某些元素相关的某些一 致性。 Examples: • Validation Standard验证标准 • Documentation Standard文档标准 • Materiality Standard重要性标准 51 Example: Documentation Standard • Documentation must have certain sections; • 文件必须有某 些部分; • Documentation must clearly delineate the tests used to show the model is robust and fit for purpose; • 文件必须清楚 地说明用于证明模型稳健且适合目的的测试; • Documentation must clearly identify the stakeholders for the model (Business Line, Model Owner, etc.); •文档必须清 楚地确定模型的利益相关者(业务线,模型所有者等); • Documentation must identify and assess model assumptions and model limitations; • 文件必须查明和评估模型 假设和模型局限性; 52 MRM Governance - Procedures What is a procedure?什么是程序? A procedure provides detailed mandatory steps (sometimes in the form of a checklist) someone needs to follow to achieve a recurring task or comply with a policy. These procedures can include step by step instructions or statements telling you where something needs to go. A procedure informs employees how to carry out or implement a policy. Procedures usually contain written instructions in logical numbered steps.程序提供了详细的强制性步骤(有时以清单的形式),某 人需要遵循这些步骤才能完成重复性任务或遵守策略。这些过程可以包括分步说 明或语句,告诉您某些东西需要去哪里。程序通知员工如何执行或实施策略。过 程通常包含逻辑编号步骤中的书面指令。 53 Example: Validation Procedure • What kinds of tests a validator is expected to perform (conditional on the model type);验证者预期执行哪些类型的测 试(取决于模型类型); • Thresholds for certain tests (resulting in a pass or fail); • 某些测试的阈值(导致通过或失败); • Thresholds for model rejection; • 模型拒绝的阈值; • Requirements for escalating model issues. • 对不断升级 的模型问题的要求。 54
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MRM Assignment 2
Problem #1 (4 pts): Read the following draft model risk policy below. Please make 2-3 suggestions on
how to improve the policy. Please explain the reasoning behind your suggestions. (Hint: Compare
against the policy requirements found in Lecture 5)
Sample MRM Policy
Purpose: This policy is meant to provide the primary objectives of the Model Risk Management for the
bank. It is also meant to provide clear definitions on model and model risk and give clear rules on how
model satisfies compliance to the MRM policy. This includes requirements for vendor models.
This policy defines a model as quantitative method, system, or approach that applies statistical,
economic, financial, or mathematical theories, techniques, and assumptions to process input data into
quantitative estimates.
Model Risk is assessed via the measurements of certain KRIs and KCIs in the Model Lifecycle to ensure
that model risk is always within the risk appetite set by the BoD.
The BoD delegates the overall management of model risk to the Model R...


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