CECL Model Validation: The Role of Benchmarking and Challenger Models

Model benchmarking, in which model outputs are compared with those generated using a different methodology, has been used as a model validation tool for many years, at least since the publication of regulatory guidance on Model Risk Management in SR 11-7 more than a decade ago. Under the market disruption and aggressive policy intervention that were hallmarks of the pandemic, a benchmark model may help users gain greater confidence in their production “champion” model, or alternatively highlight the sensitivity of model outcomes to the selected methodology and assumptions. Model benchmarking has also been widely used in validating stress testing models, which seek to identify potential earnings impacts of credit conditions under hypothetical macroeconomic conditions as opposed to a baseline forecast.
In this webinar, SS&C EVOLV’s Theresa Meawad had the rare opportunity to speaker with Ipso Facto’s Dr. Bill Segal. Dr. Segal is an industry recognized financial modeling expert who has led some of the most sophisticated institutions. By the end of the webinar, you will have a better understanding of the role benchmarking and challenger models should have in validating your CECL results, and how to:
  • Use these tools as part of a robust model validation approach,
  • Gain confidence in your champion model, and
  • Validate stress testing results