QuIC divides validation and quality assurance of our implementations into internal model validation and external model validation, with the overall goal of giving our customers complete peace of mind concerning the accuracy of our models and simulations.
Internal model validation (IMV)
QuIC’s internal model validation provides confidence. The simulations and models developed for each of our clients have been through a rigorous quality assurance process, making external model validation faster, easier and more accurate.
IMV is based on an iterative process of unit testing, based on our library of test frameworks from previous implementations and against standard academic models. Our focus is on comparative and calibration testing to ensure that our simulations and models produce the same results as our customers’ existing models.
As well as ensuring that the format and syntax of our client’s input data are perfectly mapped, IMV includes checking that instruments and MTM/PFE calculations are accurate over given timescales and that call dates are activated correctly, confirming the calibration routines of our underlying models, and confirming that the models handle market data correctly.
External model validation (EMV)
QuIC’s external model validation gives risk managers confidence that QuIC’s models and simulations will perform faster, more accurately and across more instruments than their existing systems and models. This is particularly significant when banks have mistakenly assumed that their middle office risk models accurately mirror the calculations made in their front office applications.
QuIC has successfully run many EMVs and user-acceptance tests so we know where potential problems may arise, specifically understanding the complex landscape of varied technical, financial engineering and political issues.
Where necessary, QuIC’s financial engineers will deconstruct our client’s portfolios and take responsibility for ensuring that client data inputs are accurately reconciled with the new simulations and models across front and middle office systems.
Summary
The overall aim of QuIC’s IMV and EMV processes is to ensure that our clients are not only confident in the outputs from our systems but also understand and can explain the outputs in the context of existing front office calculations. Furthermore, EMV can support lower capital requirements; a key part of Basel II’s internal model method (IMM) certification, which QuIC has already achieved for several clients, is the requirement to demonstrate successful EMV results.