J 2019

Validation of the backtesting process under the targeted review of internal models: practical recommendations for probability of default models

PROROKOWSKI, Lukasz

Basic information

Original name

Validation of the backtesting process under the targeted review of internal models: practical recommendations for probability of default models

Authors

PROROKOWSKI, Lukasz

Edition

Journal of Risk Model Validation, London, England, INCISIVE MEDIA, 2019, 1753-9579

Other information

Language

English

Type of outcome

Článek v odborném periodiku

Confidentiality degree

není předmětem státního či obchodního tajemství

References:

Impact factor

Impact factor: 0.412

DOI

UT WoS

000470784500005

Tags

International impact, Reviewed
Změněno: 24/10/2022 14:42, Mgr. Pavlína Kurková

Abstract

V originále

This paper provides practical recommendations for the validation of the backtesting process under the targeted review of internal models (TRIM). It advises on the introductory steps for validating the backtesting process and reviews the available statistical tests for calibration, discrimination and stability backtesting. The TRIM regulatory exercise is an international supervisory initiative that inspects the internal models and related internal risk and governance policies of eurozone banks that are permitted to use the advanced internal risk-based (AIRB) approach. Under the TRIM guidelines, the designated banks should have specific policies and internal guidelines for the validation of the backtesting process. Further, the affected banks are required to validate the entire backtesting process. Addressing these needs, our paper serves as a basis for producing such policies and utilizing appropriate statistical tools for validating the backtesting process. This paper focusses on probability of default models. To date, no academic study has discussed the validation of the backtesting process with reference to the TRIM rules.