Market and Credit Risk Model Validation Services & Solutions

Model Validation Solutions

CompatibL offers independent validation services across a wide range of valuation and risk models, including formal regulatory validation reports as well internal reviews with actionable insights to mitigate models’ weaknesses and limitations. We have expertise in the latest quantitative research and model validation methodologies as well as implementation practices.  

Regulatory Validation Services

A transparent and independent model review process is an integral part of modern model vetting and model risk frameworks. 

CompatibL has hands-on experience and expert judgement in all aspects of model QA and review processes. We validated hundreds of models and software solutions for banks and asset managers across multiple model types with applications to valuation and risk management.

CompatibL’s regulatory expertise spans real-world and risk-neutral multi-factor and multi-asset risk models for most asset classes including interest rates, foreign exchange, equity, inflation, credit and commodities. 

Model Validation Services

Major risk metrics and valuation adjustments

SA-CCR

Capital optimization models

Regulatory MPOR

Multi-curve real world and risk neutral valuation, capital and PFE models

Basel II, II.5, III, early IV 

ISDA SIMM

Advanced multi-currency CSA and collateral simulations 

IRRBB

FRTB for market and credit risk

Validation Steps

CompatibL’s approach to model validation and verification includes the following stages for a comprehensive and detailed review of the model and its components. 

Model
specification stage
Validation
specification stage
Testing stage
Conclusion stage
Delivery stage

Analyze model documentation, verify its consistency, level of detail and correctness
Analyze the relevant regulatory guidance and market practice, model choice applicability and adequacy, and propose operationally feasible alternatives
Identify and assess key model inputs and outputs, verify their completeness and proper use of market data for a given model
Identify and assess key model assumptions and limitations, then compare to other model alternatives

Identify and assess key validation assumptions and limitations, given input and output data and possible operational constraints
Review data scope, validation criteria and functional tests for model vetting based on the results from the previous stage

Run validation tests
Assess the impact of model choice on material measures

Analyze individual test results, provide recommendations and conclusions
Gather all findings into an executive summary and a highly detailed full validation report, conforming to the relevant regulatory validation template when applicable

Deliver validation documentation, reports, and supporting materials
Deliver test code artifacts and detailed documentation that allows this validation to be rerun in-house after project completion

Training Courses

CompatibL has developed and presented several training courses on market and credit risk model validation, FRTB validation and other solutions to help specialists involved in this area to broaden their expertise in the latest regulatory frameworks. CompatibL team can customize our training program to suit the needs of your quants and model validation experts.

Why CompatibL

Cost Savings

Our approach reduces the costs compared to a traditional validation approach as we reuse standard validation code components gathered over time in our model validation platform.

Independence

Rely on independent high-quality model validation performed by a team with extensive experience and a solid model validation code framework.

Highly qualified Expert Team

Benefit from access to a wide range of quantitative and technical resources and ensure that top experts work on validating models critical to your business.

Documentation

The documentation delivered during the validation process is comprehensive and sufficient to independently reproduce the calculation results.

Extensive Experience with In-House and Vendor Models

CompatibL has experience with the leading quantitative model types published in academic literature, and with the implementation of these models by software vendors, leading to more effective and streamlined validation process.

Deep Analysis of Model Assumptions, Limitations and Output

We don’t stop at producing a model validation report and also help you to take a wider view on model risk, its origins and potential impact on your business.

Read the Report