medium · Frm Part 2 Operational Risk
In the context of Model Risk Management, what is 'effective challenge'?
- A mandatory code-review session performed by the model's original author.
- A formal debate between two traders about which model produces the highest profit.
- The process of a regulator issuing a fine for a model failure.
- Critically evaluating a model's logic and testing its limitations by a party not involved in its development.
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