The S-Curve

White Paper: A Purpose-Driven Approach to Model Validation

Mackenzie Meadows
Andrew Davidson
Thoughts

Financial institutions rely on models for a wide range of purposes, including valuation, forecasting, risk management, capital planning, accounting, trading, and reporting. The same model may be used differently by different organizations, and sometimes differently within the same organization. For that reason, model validation should not begin with the question, “Is the model correct?” Instead, the more useful question is: “Is the model appropriate for the purpose for which it is being used?”

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