The pre-implementation validation of a model is the first independent validation that takes place after the model development. The objective of such validation must ensure that the model is fit for purpose, meets economic intuition as defined in the MMS and generates results that are assessed as reasonable by expert judgement. The depth of such validation must be defined based on model materiality and follow the institution’s model management framework. Tier 1 models must be subject to comprehensive pre-implementation validation.
6.10.2
For the qualitative review, the pre-implementation validation must cover the elements presented in Article 10.3 pertaining to the scope of the independent post-implementation validation. For the quantitative review, the pre-implementation validation must assess the model accuracy, stability and sensitivity as explained in Article 10.4.3 also pertaining to the scope of the independent post-implementation validation.
6.10.3
Institutions must document the scope, limitations and assumptions of models as part of the pre-implementation validation.