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Model Risk - Executive Director - Based in London Job summary:
- Financial Institutions routinely use models for a broad range of activities including credit underwriting, valuing financial instruments, measuring and managing risk, assessing the adequacy of reserves and capital resources, and many other applications. Model Risk arises from the potential adverse consequences of making decisions based on incorrect or misused model outputs and reports, leading to financial loss, poor business decision making, or reputational damage.
- The Model Risk Group (MRG) is responsible for conducting model validation to help identify, measure, and mitigate Model Risk. The objective is to ensure that models are used appropriately in the business context and that model users are aware of the models' strengths and limitations and how these can impact their decisions.
- Pricing and risk measurement models for financial derivatives products traded by the Investment Bank (IB) client businesses are one of the areas of focus for MRG. Sound usage of these models requires a deep understanding of the theoretical underpinnings, expertise of the underlying markets used to manage risk, and an understanding of model performance in different regimes.
- MRG carries out model validation activities and works closely with Risk, Finance and FO professionals to review model validation findings, on-going model risk measurement and risk mitigating strategies.
- Lead for the validation of derivatives pricing and risk measurement models in a major asset class of the IB. Manage team of 2 to 4 people.
- Carry out model validation activities, including model reviews and model risk measurement projects:
- Model reviews: evaluate the conceptual soundness of pricing engines; the reasonableness of assumptions and reliability of inputs; the suitability of engines to particular products or structures; the completeness of the testing performed to support the correctness of the implementation; the robustness of numerical aspects; the suitability and comprehensiveness of performance metrics and risk measures associated with the use of the model.
- Model risk measurement projects: design and implement experiments to measure the potential impact of model limitations, parameter estimation error or deviations from model assumptions; compare model outputs with empirical evidence and/or outputs from alternative model benchmarks
- Liaise with FO, Risk and Valuation Control Groups to understand usage of models in the business and syndicate the findings of model validation