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Validation Techniques

Sensitivity analysis

Testing how a model's outputs change in response to variations in individual inputs or assumptions, used to identify which factors most influence a model's results and where it may be unstable or overly reliant on a single assumption. A standard technique within conceptual soundness review.

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

How the term is used in model risk management

Testing how a model's outputs change in response to variations in individual inputs or assumptions, used to identify which factors most influence a model's results and where it may be unstable or overly reliant on a single assumption. A standard technique within conceptual soundness review. 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

Conceptual soundnessModel validationStress testing

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.GuideTop model risk management firmsThe right model risk management firm depends on the models in scope, governing framework, independence requirements, technical methods, jurisdiction, and delivery capacity. This guide groups the directory's advisory firms alphabetically and provides a verification checklist. It does not assign rankings, scores, or endorsements without comparable evidence.