The Chief Risk Officer (CRO) needs to guide the bank through the stages of developing, validating, and implementing models specifically for a new commercial loan product. This includes the possibility of creating a separate model that is distinct from the models already used for residential mortgages and credit cards. What steps should the CRO recommend to achieve this?

Exam-Like

Apply the strongly performing existing model to the new commercial loan product given the model's successful track record.

7.1%

Develop a new model for the commercial loan product and avoid the use of qualitative or judgmental adjustments to the model's quantitative output.

12.5%

Make the model development team responsible for validating all of the bank's models that are currently operational.

8.9%

Perform sensitivity analysis on all models used by the bank to identify market conditions under which they might perform poorly.

71.4%

Financial Risk Manager Part 2