A model risk officer receives a report showing that a production model's Gini coefficient has declined from 0.72 to 0.54 over 18 months. What action is MOST appropriate under standard model risk management practice?
Select an answer to reveal the explanation.
Short Explanation and Infographic
Here's the deal — c is correct because a significant decline in discriminatory power (Gini dropping 18 points) represents a material degradation that warrants escalation to the model risk committee and an out-of-cycle validation, as required by SR 11-7 for models with significant performance deterioration. A is insufficient given the magnitude of decline.
Full explanation below image
Full Explanation
C is correct because a significant decline in discriminatory power (Gini dropping 18 points) represents a material degradation that warrants escalation to the model risk committee and an out-of-cycle validation, as required by SR 11-7 for models with significant performance deterioration. A is insufficient given the magnitude of decline. B is premature without investigation. D is a potential remediation action but should follow validation, not precede it.