overview

Independent, Transparent, Trusted

Our team of financial engineers can provide comprehensive testing and advisory services for model validation and assist with regulatory compliance issues. Armed with an array of standardized model tests and access to the suite of Numerix market-standard models, Numerix financial engineers enable our clients to put their business risk profile into sharper focus—enabling better and more timely decisions.

At the Core of Our Numerix Model Validation Services: Numerix Models & Methods

Numerix financial engineers leverage the power of Numerix CrossAsset, with access to over 100 market standard models and methodologies for all major asset classes— including fixed income, inflation, credit, equity, foreign exchange and commodities. Our cross-asset expertise allows us to provide the industry’s only commercially available hybrid model framework for pricing multi-asset basket trades.


capabilities

The services provided by our team of financial engineers include the following:

Tests with Multiple Models, Calibration & Interpolation Methods

Our services incorporate the flexibility of the Numerix architecture—which enable users to swap models, calibration methods, calibration instruments, pricing methods and interpolation methods. Once a deal type has been structured for one model, it is then priceable in all models, with all methods. Thus, a model may be validated by comparing it to a large collection of Numerix models, to determine performance against a firm’s proprietary models.

Stress Testing of Models

The Numerix Risk Scenario Framework functionality allows our team to customize as many market scenario shocks as desired, which can then be applied to any market scenario from history. Therefore, we may stress the model with either a standardized (e.g. a ladder report) or randomized set of shocks applied to various scenarios taken from historical data.

Test of the Model by Instrument Decomposition

Our quantitative services clients benefit from the fact that Numerix separates the model from the payoff and the method. That means a Numerix model may be further explored by using the same model to remove features from the instrument—some or all of the call or put dates, a barrier, or a digital feature such as a range accrual. Our team of experts understand that these features are often subject to errors of numerical implementation, and these types of errors may be rapidly tracked down by the decomposition that the Numerix architecture allows.

Standardized Testing

Whether your front office and risk department are utilizing Numerix analytics, or you are utilizing proprietary models, Numerix financial engineers employ the use of standardized tests to confirm model accuracy and performance, confirming both mathematical and financial correctness of the models.

Standardized Tests Utilized by Our Team of Financial Engineers for Mathematical Correctness Include:

  • A direct Comparison test for each model, method, with a single payoff feature (e.g. barrier, early exercise, range accrual), which aids Decomposition Testing of more complex deals

  • Limiting Cases of Identities for Payoff (e.g. Knock-in/Knock-out) and for Model (e.g. Heston v. Black Sholes)

  • Smoothness tests for Greeks

  • Calibration Round Trip Tests

  • Convergence and Convergence Rate Tests

  • Tests for the performance of the model’s hedges can be run, either on Numerix models or on proprietary models.

  • Calibration Stability Tests

  • Calibration Error Tests

  • P&L Attribution Tests

  • Variance of Hedged Portfolio Test

  • Cost of Hedging Test

Benefits & Features

Auditability

Our team of financial engineers are able to provide auditable XML files to our clients. In fact, any validation test can be serialized and exported into a self-contained Numerix XML file that captures all model inputs, including terms and conditions, market data, model choice and calibration assumptions, calendars and more.

Once converted to XML, the model can be ported throughout the institution for use within any operations. Additionally models can be “rehydrated” at any future date allowing users to audit and review the model all without the need to reconstruct historical pricing environments. The Numerix XML can also be ported to any regulatory or audit agency if required.

Case studies
Banque Internationale a Luxembourg Model...
Belfius Bank Model Validation Case Study
OTP Bank CrossAsset/Model Validation Case Study
Swedbank CrossAsset/Model Validation Case Study
Additional Resources
Press Release
BIL Selects Numerix CrossAsset for Model Validation
Press Release
Belfius Chooses Numerix for Model Validation
In The News
Belfius Uses Numerix To Tackle Model Risk
Press Release
Massimo Morini, Ph.D. at IMI Bank of Intesa San Paolo Joins Numerix Quantitative...
In The News
Numerix Adds Automated Model Validation Software
Press Release
Numerix Launches Automated Model Validation Technology
In The News
Numerix takes on "sleeping giant" of model risk
Press Release
OTP Bank Selects Numerix CrossAsset Analytics for Pricing and Model Validation
Press Release
Swedbank Chooses Numerix CrossAsset for Structuring and Pricing Complex Derivatives...
Product Collateral
Fact Sheet: Numerix Model Library - Comprehensive Cross-Asset Library of Industry-...
Product Collateral
Numerix Model Risk Management Fact Sheet
Product Collateral
Numerix Models and Instruments by Asset Class Fact Sheet: Access Models for All...
Analyst Report
Reducing the Risk of Using Financial Models
On-Demand Webinar
Model Validation Solution Seminar | Model Risk & Performance
On-Demand Webinar
Challenges & Opportunities in Dealing with Model Risk
On-Demand Webinar
Model Risk - Assessment, Regulation, and Best Practices
On-Demand Webinar
Model Risk Management: Quantifying, Monitoring and Mitigating Model Risk
On-Demand Webinar
The validation of derivative pricing models can be a slow, labor intensive and...
On-Demand Webinar
Model Validation Case Studies: Using Automated Model Tests to Improve Derivative...
On-Demand Webinar
Model Validation For Derivative Pricing: The First Line of Risk Management Defense
On-Demand Webinar
Pricing Model Validation – Regulations, Best Practices & New Approaches
Conference Presentation
Model Risk Management - How Far Have We Come?
White Paper
Mastering Model Risk: Assessment, Regulation and Best Practices
White Paper
Model Risk: The Challenges of Legacy Code and Best Practices
White Paper
Model Validation: New Approaches in Testing Mathematical and Financial Correctness...
White Paper
Model Validation: New Approaches in Testing Mathematical and Financial Correctness...
Product
Numerix Model Library: The foundation for Numerix Market-Leading Analytic Suite
Product
Oneview Model Validation Studio: Consistent and Thorough Validation Achieving Faster...
Research & Insights
Model Risk Research & Insights

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