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Model verification

H

Harleen Anand

Member
hi,
can anyone explain to me what does it mean to have "independent verification of the output for reasonableness"
secondly, what does it mean to have a material error in valuation results.
 
Hi

'Independent verification' refers to model checking. It could mean that the checking is performed by someone who is independent of the model developers - perhaps even external to the company. It could mean that the checking has to be done independently from other figures produced by the model, so using other figures or sources (otherwise you could falsely decide that the outputs are fine as they are consistent with other figures produced by the model, but both could contain the same error).

A material error in valuation results means that whatever is being valued (eg the value of liabilities) is materially mis-stated: in other words, a significant error has been made.

[BTW I have renamed this thread to make the content clearer for other students using the forum.]
 
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