Written by an industry specialist, with over ten years op risk experience, this executive report serves as a working manual for operational risk professionals preparing to submit their AMA application. This essential resource will help you to ensure that your models are fully compliant. It will also prove a vital reference for auditors and regulators assessing these models.
With analysis and examples of the current methodology and regulation, this best practice guide allows you to benchmark your methods. Furthermore, it provides you with the tools and techniques needed to:
-Clearly document your validation process
-Explain and justify your modeling choices
-Assess the strengths and weaknesses of your models
-Anticipate any issues auditors might raise.
-It concludes with a detailed discussion of the role of the user test, demonstrating how the measurement model is integrated into day-to-day risk management.
Sergio Scandizzo is head of the Operational Risk Unit at the European Investment Bank (EIB) in Luxembourg. Prior to his position at the EIB he was senior manager in the London office of PricewaterhouseCoopers and, prior to that, a senior manager of the Operational Risk Group at the Canadian Imperial Bank of Commerce in Toronto. He holds degrees in computer science and finance.
Sergio was a contributing author to the award-winning Risk Books title Advanced Measurement Approach to Operational Risk, edited by Ellen Davis. He is also the author of several journal papers on the subjects of fuzzy logic, genetic algorithms and risk management.
1. An Introduction to Model Validation
1.2. Validation policy
1.3. Key components of validation
1.4. Validation of AMA models
2. Risk Measurement Process
2.1. Input validation
2.2. Model validation
Appendix A - An input-output model for operational interdependence in a complex organisation.
Appendix B – Discrete and continuous probability distributions
3. The AMA Validation Process
3.1. The AMA model
3.2. The validation policy
3.3. The validation report
4. The User Test
4.1. Not just a compliance exercise
4.2. Maintenance and evolution
4.3. AMA and the management of operational risk
4.4. AMA and the management of the bank: is it adding value?
Appendix A - Specimen of model documentation for model validation
Appendix: An AMA Validation Checklist