A model risk manager is reviewing a newly developed credit risk model. According to SR 11-7 guidance, which activity represents the MINIMUM acceptable validation requirement before a model enters production?
Select an answer to reveal the explanation.
Short Explanation and Infographic
Here's the deal — b is correct because SR 11-7 establishes that model validation must include conceptual soundness evaluation (reviewing the model's theory and design), outcome analysis (backtesting and benchmarking), and an ongoing monitoring plan. A is insufficient as user acceptance testing is not independent validation.
Full explanation below image
Full Explanation
B is correct because SR 11-7 establishes that model validation must include conceptual soundness evaluation (reviewing the model's theory and design), outcome analysis (backtesting and benchmarking), and an ongoing monitoring plan. A is insufficient as user acceptance testing is not independent validation. C is not required by SR 11-7 as a minimum. D is not a general pre-approval requirement for all models.