 MODEL VALIDATION
Financial institutions of all sizes and charters are required to validate their risk models, including those used for ALM. Your requirements are the focus of our assignment. The report set includes an Executive Summary, recommendations based on current “best practices”, and a detailed model implementation review. Specific suggestions on improving the effectiveness and efficiency of your modeling process are integral to your report.
Our proprietary methodology is referred to as the “ABC process” and was originally published in Bank Asset/Liability Management in 2002. It follows from the three general approaches for model validation outlined in OCC 2000-16, the governing interagency document:
- Assessment Procedures: independent review of the logical and conceptual soundness
- Benchmarking Procedures: comparison against other models, and
- Comparative Procedures: comparison of model predictions against subsequent real-world events.
In addition to assessing your ALM model, we offer benchmarking procedures as well. As we license two leading ALM models, we use those to “parallel model” your bank, thus benchmarking the results against another model. All of our validation assignments include back-testing results using a variety of approaches, including statistical analysis.
Let our hands-on validation and/or modeling experience work for you. We have experience with the leading commercial ALM models: 
- ALMeter (Bankmaster)
- Bancware
- BASIS (Darling)
- Farin
- FTI
- IPS-Sendero
- Profitstar
- QRM
- ZMFS
In addition, we have performed validation for banks using proprietary models, both in-house and outsourced. For banks that outsource the ALM modeling process, model validation is still required. Please check with us to see if we have previously worked with your provider. If so, we can offer a timely and affordable solution.
Presentations and publications include:
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