Model Risk Management Role - Investment Bank

The ongoing monitoring of the model is a task that must be done in all phases of the model lifecycle (development, implementation, use). In order to track and measure the efficiency and adequacy of models, the model monitor conducts continuous analysis and controls as an early warning both initially at implementation (for new models) and regularly as a part of the model- s ongoing monitoring.

For the purpose of these tests, the model monitor is responsible to:

- Backtest & re-calibrate each model designed and developed by the business, hence a thorough understanding of model development under Basel & IFRS norms is critical.

- Choose adequate model outcome analysis techniques such as:

a) Model estimates vs realized values (e.g. back-testing for some models);

b) Stability of model outcomes;

c) Benchmarking: model output vs output generated by comparable models or applications;

d) Sensitivity analysis to test robustness.

- Analyze the model output and the related components (if applicable);

- Model assumptions and limitations validity;

- Results of benchmarking and sensitivity analysis;