Stress testing model validation

Original by Moody's, 2014 

This summary note was Posted on

Webinar on demand, Moody’s Analytics, September 2014, Accessed March 2015

  • Critical review of elements, key assumptions, uncertainties and limitations
  • Review of program’s implementation, including the design of scenarios
  • Backtesting as part of a validation framework but not limited to
  • Dynamic vs static balance sheet
  • Strong infrastructure needed
  • How is stress test embedded?
  • Not only challenge by validation but also by senior management
  • Roadmap of changes needed
  • Sensitivity analysis of key model assumptions