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Data & Performance

Model performance

How well a model behaves against defined objectives, outcomes, stability measures, limitations, and business consequences. Performance measures vary by model and should be linked to thresholds and actions.

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

How the term is used in model risk management

How well a model behaves against defined objectives, outcomes, stability measures, limitations, and business consequences. Performance measures vary by model and should be linked to thresholds and actions. 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

BacktestingCalibrationOngoing monitoring

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.FrameworkSR 26-2SR 26-2, issued jointly by the Federal Reserve, OCC, and FDIC on April 17, 2026, is the current US interagency guidance on model risk management. It supersedes SR 11-7 (2011) and SR 21-8 (2021), preserving core disciplines like effective challenge and independent validation while shifting to a risk-based approach tailored to an institution's model risk profile, size, and complexity.FrameworkHKMA CA-G-4HKMA CA-G-4 sets validation expectations for internal-ratings-based credit-risk systems used by authorized institutions. The current 2025 version covers governance, data, model design, quantitative and qualitative validation, use tests, stress testing, overrides, validation frequency, independence, findings, and supervisory review. It is model-specific rather than an enterprise-wide MRM standard.