The Basel Committee has released recommendations on how to validate the IRB models right after Basel II adoption (see [BCBS (2005c)]). These recommendations cover PD, LGD, EAD properties validation. They involve the description of the applicable statistical procedures. However, there are no thresholds to decide whether a risk model is compliant or not. Another shortcoming is the absence of guidance regarding the validation of the predicted total (gross) risk. Below we present the most important findings to overcome the shortcomings of the published regulatory guidelines.
Model Validation and Audit
Giuseppe Orlando
;
2022-01-01
Abstract
The Basel Committee has released recommendations on how to validate the IRB models right after Basel II adoption (see [BCBS (2005c)]). These recommendations cover PD, LGD, EAD properties validation. They involve the description of the applicable statistical procedures. However, there are no thresholds to decide whether a risk model is compliant or not. Another shortcoming is the absence of guidance regarding the validation of the predicted total (gross) risk. Below we present the most important findings to overcome the shortcomings of the published regulatory guidelines.File in questo prodotto:
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