IPV/Valuation vs Model Validation

Rotelli · November 4th, 2013, 5:42 pm

What is the difference between the work of IPV/Valuation teams and Model Validation? My understanding is that IPV teams mostly replicate the front office models, check their assumptions and limitations, the derivation of any equations used for pricing (unless the model is a mainstream one), the appropriateness of the computational methods used, etc, whereas Model Validation is more focused on validating the implementation. Is this correct? Am I right that in the last few years the line between them seems to have become a bit blurred?

DevonFangs · November 5th, 2013, 8:36 am

Maybe it depends on the bank, but my impression is that it's the other way around, with Model Val checking " their assumptions and limitations, the derivation of any equations used for pricing (unless the model is a mainstream one), the appropriateness of the computational methods used, etc," whereas IPV replicate the pricers and check the numbers are correct. In fact, IPV have a more production-like development environment than MV, AFAIK.

ThinkDifferent · November 5th, 2013, 9:08 am

the guy with a Calabi-Yau manifold on the avatar is correct.

EscapeArtist999 · November 5th, 2013, 12:55 pm

QuoteOriginally posted by: ThinkDifferentthe guy with a Calabi-Yau manifold on the avatar is correct.please don't encourage him.

DevonFangs · November 5th, 2013, 1:09 pm

QuoteOriginally posted by: EscapeArtist999QuoteOriginally posted by: ThinkDifferentthe guy with a Calabi-Yau manifold on the avatar is correct.please don't encourage him.are you this guy who thought I was someone else?

rmax · November 5th, 2013, 4:04 pm

QuoteOriginally posted by: ThinkDifferentthe guy with a Calabi-Yau manifold on the avatar is correct.+1

DevonFangs · November 5th, 2013, 10:36 pm

QuoteOriginally posted by: rmaxQuoteOriginally posted by: ThinkDifferentthe guy with a Calabi-Yau manifold on the avatar is correct.+1don't encourage the one that encourages me