Model Validation and Development of Model Performance Monitoring Matrix

  • Financial Modeling
  • Risk Management

For a mid-sized DFAST US bank headquartered on the West Coast, Prescio validated a Residential Real Estate Automated Valuation Model AVM), and developed model performance monitoring plans for the majority of the bank’s warehouse of active models including ALLL, ALM, Prepayment, Non-Maturing Deposit Decay Rate, PPNR Aggregator, AML, Residential and Commercial AVM and Price Indicators, Value-at-Risk, CRE and Cash Flow Stress Tests, Credit Loss Model Aggregator, Commercial and Personal Credit Scoring, and Trepp Credit Loss models. Performance monitoring plans included a critical review of current performance monitoring plans, development of additional tests to monitor whether models continue to perform adequately in face of potential changes in bank policy or strategy, model assumptions, data inputs, or current conditions. Thresholds and Key Performance Indicators were recommended for each proposed test. Implementation of the recommended model performance monitoring plans by the model owners was reviewed as well.