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Validation Techniques

Use test

An assessment of whether a model is actually being used the way it was designed and validated to be used, and whether that use remains within the model's intended scope and limitations. A model validated for one purpose but repurposed for another without revalidation is a common source of model risk.

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

How the term is used in model risk management

An assessment of whether a model is actually being used the way it was designed and validated to be used, and whether that use remains within the model's intended scope and limitations. A model validated for one purpose but repurposed for another without revalidation is a common source of model risk. 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 validationModel riskConceptual 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.FrameworkEIOPA Internal Model GuidelinesEIOPA's Guidelines on the use of internal models support consistent Solvency II supervision of insurers using full or partial internal models. They address application and approval, model changes, the use test, governance, documentation, data, validation, expert judgment, external models and data, group models, and supervisory communication.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.