A Study of the Validation of Credit Risk Model

With the issue of new Basel capital accord,the banking all of the world began to pay more attention to research and develop new credit risk models to implement the IRB approach.(Internal rating-based approach).This makes the validation of these models getting more and more important.However,some issues remain to be resolved.One of them is to build a complete framework of model validation.The other is data limit.This paper summarizes the experiences of international banks and related researches and attempts to build a theoretical framework of validation.Then it brings out a sample technology to overcome the data limit.Finally,this paper analyzes some common validation tools and makes some suggestions for Chinese banks.