To ensure lnternal Rating Based (IRB) models are adequate and address regulatory requirements, IRB models are subject to a regular validation cycle, with emphasis given to a thorough model backtesting and benchmarking. In addition, validations require testing of conceptual soundness and are commonly supplemented by the outcome of model monitoring and the use of external data sources.
IRB and IFRS 9 credit models deteriorate when models fail to capture emerging risks. Consequently, both Basel IV and IFRS 9 raise the standards expected for model validations. Demonstrating robustness of credit models under stress and ensuring accurate model calibrations continues to deliver critical impacts for provisioning and capital efficiency. Read more about our approach and support for validations:
→ The Elements of Credit Risk Validation (selected examples)
Disclaimer: Data, charts and commentary displayed herein are for information purposes only and do not provide any consulting advice. No information provided in this documentation shall give rise to any liability of Auriscon HK Ltd and Auriscon Ltd.
Our Aproach
is to support or independently carry out validation activities, both according to the timetable of the institutions validaton framwork or ad-hoc based on moment and circumstances. We assist in defining and performing various statistical testing and analyses covering validaiton of risk parameter PD, LGD, EAD and Credit Portfolio models.
Planning & Execution
We support in planning and performing validation exercises covering Statistical Testing, Data, Programming, and Report Automation.
Specialisation
As a specialist provider with expertise in Credit and Model Risk, we can suport with relevant contributions.
Risk-Based Approach for Testing
Identifying latent and emerging risks highlights detrimental effects in relation to the validaton subject. Our validation contribution covers qualitative validation in conjunction with statistical testing to underpin benchmarking and backtesting.
Contact us to request further details on our support.
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Validation Levels
NB: UNDER CONSTRUCTION
The Elements of Validation (selected examples)
NB: UNDER CONSTRUCTION
Backtesting at Calibration Level
- Statistical Calibration Testing
- Simulation of Test Scenarios
- Numer of Overrides
- Portfolio Stability
- Overestimation / Underestimation
We involve our clients throughout the stages beginning from an initial proposal for a suitable analytical model towards interpretation and use of metrics in marketing.
We progress during analysis of data and model building based on agreed terms and targeted outcomes.
At Auriscon Limited have the right expertise.
We can support on-site or by working remotely
based on flexible allocations.
Traffic-Light-Dashboard
- Level-2 for PD (example)
- Traffic-Light indications for calibration accuracy
Backtesting and Benchmarking at Model Level
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We involve our clients throughout the stages beginning from an initial proposal for a suitable analytical model towards interpretation and use of metrics in marketing.
We progress during analysis of data and model building based on agreed terms and targeted outcomes.
At Auriscon Limited have the right expertise.
We can support on-site or by working remotely based on flexible allocations.
Traffic-Light-Dashboard
- Level-1 for PD and LGD (example)
- Traffic-Light indications for discrimination power
NB: UNDER CONSTRUCTION
Validation Testing at Data Level
- tbc
- tbx.
- tbx
- tbx
We involve our clients throughout the stages beginning from an initial proposal for a suitable analytical model towards interpretation and use of metrics in marketing.
We progress during analysis of data and model building based on agreed terms and targeted outcomes.
At Auriscon Limited have the right expertise.
We can support on-site or by working remotely based on flexible allocations.