Explanation:
Under the Solvency II Directive, an internal model used to calculate the Solvency Capital Requirement (SCR) must satisfy several specific standards: Statistical quality standards (Article 121), Calibration standards (Article 122), the Use test (Article 120), Validation standards (Article 124), Documentation standards (Article 125), and Profit and loss attribution (Article 123). There is no test strictly called the "Validity test" (the correct terminology is "Validation standards").
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Q.17 Pillar 1 of solvency II specifies a minimum capital requirement (MCR), and a solvency capital requirement (SCR). Under the internal models approach of calculating SCR, the internal model used must satisfy several tests, EXCEPT:
A
Use test
B
Calibration test
C
Validity test
D
Statistical quality test
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