Know Your Risk

We have developed enterprise-level model validation programs to ensure financial soundness and to meet regulatory requirements.

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Services Overview

Model Risk Management

ServicesWe offer independent model validation of both internally developed and external vendor models for quantitative finance and risk management.

We have developed enterprise-level model validation programs to ensure financial soundness and to meet regulatory requirements. We achieve this thorough alignment of our rigorous validation methods with industry best practices.

Best practices include deep knowledge of risk modeling analytics as well as statistical methods and standard techniques used across the industry.  

In addition, best practices are guided by OCC and FHFA regulatory information such as the FHFA’s 2009 guidance "Validation and Documentation of Models and Related Controls on Internal Processes" and the OCC’s recent 2011 "Supervisory Guidance on Model Risk Management".

Our independent model validation program has provided superior results through rigorous methods and transparent techniques.

We cover all aspects of controls, theory, data inputs, assumptions and mathematical computations. We establish and execute detailed test cases to cover all aspects of solid model risk management - including benchmarking results and backtesting predictions. The result is comprehensive documentation of all validation outcomes.

Analytical Model Development

Using our vast data warehouse, we develop and test behavioral models to predict all facets of loan performance. We track almost 3,000 PL-MBS deals and millions of loans.

We combine loan performance risk analysis with advanced statistical modeling techniques such as multinomial logistic regression. Our focus includes a balance of loan decisioning, performance monitoring and management of portfolio-level assets. This leads to RMBS securities and loan analysis that includes interest rates, prepayment and mortgage credit risk.

Our work typically includes assets such as:

  • Agency RMBS
  • Non-Agency RMBS
  • Prime
  • Alt-A
  • Subprime
  • Option-Arms
  • Negam
 

Services typically focus on risk exposure problems such as:

  • Loan underwriting decisioning
  • Scorecards
  • Loan loss exposure
  • Repurchase risk exposure
  • Loss mitigation
 

Development efforts are utilized for:

  • Portfolio analysis
  • Basel
  • PD
  • EAD models
  • Economic capital models

Mortgage Valuation Analytics

We offer guidance, testing and analytics for loan and security performance and valuation. Our work is based on a compilation of quantitative tools including interest rate models, behavioral models, loan-loss models, cash-flow analysis and stochastic solutions.