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Resources for Validating Credit and Other Risk Models

Article Quant Q&A · Author: adrCoder
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Summary

The document points readers seeking methods for model validation toward two practitioner books and a Basel Committee working paper. The requested topics include discrimination and association measures such as Gini, Somers’ D, Kolmogorov–Smirnov, and Kendall’s tau, along with binomial and adjusted binomial tests. The stated application is validation of banking models, including credit risk and other risk types.

The accepted response recommends books by Christian Meyer and Peter Quell, and by Sergio Scandizzo. Another response describes a Basel working paper as a broad summary of relevant metrics. The document provides references rather than explaining how to calculate, interpret, or compare the measures, and it supplies no validation results or evidence about the quality of the recommended sources. Readers would need to consult those materials for definitions, assumptions, and guidance on choosing tests for a particular model.

Key ideas

  • The request concerns validation metrics for credit risk and other banking risk models.
  • Suggested measures include Gini, Somers’ D, Kolmogorov–Smirnov, Kendall’s tau, and binomial tests.
  • Two practitioner books are recommended as starting points for risk model validation.
  • A Basel Committee working paper is suggested as a metric overview, but the document does not explain the methods.

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Risk managementStatistics
Full text
# Answer by Dimitri Vulis (score 1, accepted)


# Book suggestions for model validation (Gini, Somers D, Kolmogorov Smirnov, Kendal's Tau, Binomial/Adjusted binomial test etc)












Any suggestions for books that cover topics such as the ones mentioned above?

The purpose is for banking, risk management, model validation of models such as credit risk and other types of risk.

## Answer by Dimitri Vulis (score 1, accepted)

https://quant.stackexchange.com/a/54937

Risk Model Validation: A practical guide to addressing the key questions by Christian Meyer and Peter Quell.

The Validation of Risk Models: A Handbook for Practitioners by Sergio Scandizzo.

## Answer by Magic is in the chain (score 1)

https://quant.stackexchange.com/a/54935

The Basel working paper contains quite a comprehensive summary of the types of metrics you are looking for:

https://www.bis.org/publ/bcbs_wp14.pdf

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.