The Analytics of Risk Model Validation

Preface

The immediate reason for the creation of this book has been the advent of Basel II. This has forced many institutions with loan portfolios into building risk models, and, as a consequence, a need has arisen to have these models validated both internally and externally. What is surprising is that there is very little written that could guide consultants in carrying out these validations. This book aims to fill that gap.

In creating the book, we have become aware that many of these validation issues have been around for a long time and that the need for this book probably predates Basel II. Of particular interest for investment banks and asset management companies are the problems associated with the quantitative risk management of ones own ...