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2.8 Model Documentation

2.8.1
 
Rigorous documentation should be produced for each rating model as explained in the MMS. The documentation should be sufficiently detailed to ensure that the model can be fully understood and validated by any independent party.
 
2.8.2
 
In addition to the elements articulated in the MMS, the following components should be included:
 
 (i)
 
Dates: The model development date and implementation date should be explicitly mentioned in all rating model documentation.
 (ii)
 
Materiality: The model materiality should be quantified, for instance as the number of rated customers and their total corresponding gross exposure.
 (iii)
 
Overview: An executive summary with the model rating strategy, the expected usage, an overview of the model structure and the data set employed to develop and test the model.
 (iv)
 
Key modelling choices: The default definition, the rating scale and a justification of the chosen segmentation as explained in earlier sections.
 (v)
 
Data: A description of the data employed for development and testing, covering the data sources and the time span covered. The cleaning process should be explained including the filter waterfall and/or any other adjustments used.
 (vi)
 
Methodology: The development approach covering the modelling choices, the assumptions, limits, the parameter estimation technique. Univariate and multivariate analyses discussing in detail the construction of factors, their transformation and their selection.
 (vii)
 
Expert judgement inputs: All choices supporting the qualitative factors. Any adjustments made to the variables or the model based on expert opinions. Any contributions from consulted parties.
 (viii)
 
Validation: Details of testing and validation performed during the development phase or immediately after.