Rating System Validation
- Perform ongoing model validation after deployment
- Refer to Basel Commitee Working Paper 14 for PD validation criteria, but perform additional LGD and CCF validation
- Check three types of criteria
- Stability
- Ranking Power
- Calibration
- Check for trend over time
- Perform a comparison of internal vs external ratings (Benchmarking)
- Also consider
- validation at model development time
- data validation (Level 0 Validation)
- use test
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