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Validation Techniques

Benchmarking (model risk)

Comparing a model's outputs against alternative data, models, or theoretical results to identify differences and understand their sources. In independent model validation, benchmarking often uses a challenger model, an alternative model built to test whether the primary model's results hold up under comparison.

Last updated: Last reviewed by: Model Risk Directory editorial team

How the term is used in model risk management

Comparing a model's outputs against alternative data, models, or theoretical results to identify differences and understand their sources. In independent model validation, benchmarking often uses a challenger model, an alternative model built to test whether the primary model's results hold up under comparison. The exact implementation varies by institution, model type, risk rating, and governing framework. Use the linked regulatory pages and buyer guides below for scope-specific requirements.

Related glossary terms

Model validationChampion-challengerConceptual soundness

Guides and frameworks that use this term

GuideModel Risk ValidationModel risk validation is the independent testing of a specific model's conceptual soundness, ongoing performance, and outcomes, performed by staff or a third-party firm genuinely separate from that model's development. It is the 'effective challenge' function required under SR 26-2 and SR 11-7, distinct from broader model risk management program design.