CP1 Reversion

The model being used must be valid, rigorous enough for its purpose and adequately documented
The model chosen should be capable of adequately reflecting the risk profile of the financial products, schemes, contract or transactions being modelled.
So at the planning stage, the requirements of all stakeholders should be brought into account and the budget/timescales/etc should be established
At the model design stage, the methods or other models available to test the model should be considered, so that the model built can be adequately tested.
The parameters used must allow for all those features of the business being modelled that could significantly affect the advice being given.
The inputs to the parameter values should be appropriate to the business being modelled and take into account any special features of the provider and the economic and business environment in which it is operating.
The workings of the model should be easy to appreciate and communicate. This is both the structure of the model and how the parameterisation has been determined. The model should exhibit sensible joint behaviour of model variables.
The outputs for the model should be capable of independent verification for reasonableness. The results should be displayed clearly and should be communicable to those to whom advice will be given.
The model must not be overly complex so that either the results become difficult to interpret and communicate or the model becomes too long or expensive to run, unless this is required by the purpose of the model. It is important to avoid the impression that everything can be modelled.
The model should be capable of development and refinement – nothing complex can be successfully designed and built in a single attempt
A range of methods of implementation should be available to facilitate testing, parameterisation and focus of results

Model requirements