
Explanation:
The process of validation is crucial and it requires independence from model development and usage. It is generally advised that validation should be performed by individuals who are not involved in the development or usage of the model and do not have a vested interest in its validity. Independence is not a goal in itself, but it ensures that incentives are aligned with the objectives of model validation. Therefore, it is least likely to be handled by the developers of the models.
Choice A is incorrect. The individuals who develop the models are indeed responsible for coming up with a clear statement of purpose to ensure that model development is aligned with the intended use. This is because they have a deep understanding of the model's design and its intended application, making them best suited to define its purpose.
Ultimate access to all questions.
Q.4303 TCC bank has developed a set of models to analyze liquidity risk, market risk, as well as the credit risk of borrowers. Which of the following model risk management functions is least likely to be handled by the developers of these models?
A
Coming up with a clear statement of purpose to ensure that model development is aligned with the intended use
B
Rigorous assessment of data quality and relevance
C
model testing
D
Model validation
No comments yet.