Model Validation Solutions

CompatibL offers independent validation services across a wide range of valuation and risk models, including formal regulatory validation reports as well internal reviews with actionable insights to mitigate models’ weaknesses and limitations. We have expertise in the latest quantitative research and model validation methodologies as well as implementation practices.  

Regulatory Validation Services

A transparent and independent model review process is an integral part of modern model vetting and model risk frameworks. 

CompatibL has hands-on experience and expert judgement in all aspects of model QA and review processes. We validated hundreds of models and software solutions for banks and asset managers across multiple model types with applications to valuation and risk management.

CompatibL’s regulatory expertise spans real-world and risk-neutral multi-factor and multi-asset risk models for most asset classes including interest rates, foreign exchange, equity, inflation, credit and commodities. 

Model Validation Services
Major risk metrics and valuation adjustments
SA-CCR
Capital optimization models
Regulatory MPOR
Multi-curve real world and risk neutral valuation, capital and PFE models
Basel II, II.5, III, early IV 
ISDA SIMM
Advanced multi-currency CSA and collateral simulations 
IRRBB
FRTB for market and credit risk

Validation Steps

CompatibL’s approach to model validation and verification includes the following stages for a comprehensive and detailed review of the model and its components. 
  • Model
    specification stage
  • Validation
    specification stage
  • Testing stage
  • Conclusion stage
  • Delivery stage
  • Analyze model documentation, verify its consistency, level of detail and correctness
  • Analyze the relevant regulatory guidance and market practice, model choice applicability and adequacy, and propose operationally feasible alternatives
  • Identify and assess key model inputs and outputs, verify their completeness and proper use of market data for a given model
  • Identify and assess key model assumptions and limitations, then compare to other model alternatives
  • Identify and assess key validation assumptions and limitations, given input and output data and possible operational constraints
  • Review data scope, validation criteria and functional tests for model vetting based on the results from the previous stage
  • Run validation tests
  • Assess the impact of model choice on material measures
  • Analyze individual test results, provide recommendations and conclusions
  • Gather all findings into an executive summary and a highly detailed full validation report, conforming to the relevant regulatory validation template when applicable
  • Deliver validation documentation, reports, and supporting materials
  • Deliver test code artifacts and detailed documentation that allows this validation to be rerun in-house after project completion

Training Courses

CompatibL has developed and presented several training courses on market and credit risk model validation, FRTB validation and other solutions to help specialists involved in this area to broaden their expertise in the latest regulatory frameworks. CompatibL team can customize our training program to suit the needs of your quants and model validation experts.
ModVal.org, a Free Resource for Model Validation
Detailed calculation walkthroughs and validation spreadsheets for some of the most complex regulatory calculations.
Explore ModVal.org

Why CompatibL

Cost Savings

Our approach reduces the costs compared to a traditional validation approach as we reuse standard validation code components gathered over time in our model validation platform.

Independence

Rely on independent high-quality model validation performed by a team with extensive experience and a solid model validation code framework.

Highly qualified Expert Team

Benefit from access to a wide range of quantitative and technical resources and ensure that top experts work on validating models critical to your business.

Documentation

The documentation delivered during the validation process is comprehensive and sufficient to independently reproduce the calculation results.

Extensive Experience with In-House and Vendor Models

CompatibL has experience with the leading quantitative model types published in academic literature, and with the implementation of these models by software vendors, leading to more effective and streamlined validation process.

Deep Analysis of Model Assumptions, Limitations and Output

We don’t stop at producing a model validation report and also help you to take a wider view on model risk, its origins and potential impact on your business.
A New Approach
to Model Risk Control
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A New Approach
to Model Risk Control
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offered by our expert team
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    Workshop

    Machine Learning Models for Interest Rates by Alexander Sokol

    • VAE for handwritten digits from the MNIST dataset
    • VAE for the yield curve
    • Autoencoder short rate model in the Q- and P-measures
    • Autoencoder forward rate model in the Q-measure
    • Autoencoder term rate model in the P-measure
    • Hands-on examples in Python
    The workshop is open to software engineers, data scientists, quantitative risk managers, and anyone who is interested in learning more about machine learning models and their applications in finance. Register