Risk Model Validation Checklist
A risk model that has never been backtested is a number that feels safe. This checklist validates whether the model's stated losses match reality, using the standard coverage and independence tests.
Checklist Progress
Move item by item and keep your place
Progress saves locally, so you can work through the page over multiple sessions without resetting your checklist.
Checklist Sections
Work in focused batches instead of one long wall
Section 1
Phase 1: Coverage testing
Section 2
Phase 2: Distribution assumptions
Section 3
Phase 3: Correlation and aggregation
Section 4
Phase 4: Stress and governance
Pro Tips
Small moves that make the checklist easier to finish
Try These Tools
Run the numbers next
Sources & References
- Evaluating Interval Forecasts — Peter F. Christoffersen, International Economic Review (1998)
- Techniques for Verifying the Accuracy of Risk Measurement Models — Paul H. Kupiec, Journal of Derivatives (1995)
Related Content
Keep the topic connected
Trading Strategy Validation Checklist
A sign-off checklist for validating a trading strategy before risking capital: data hygiene, out-of-sample testing, trial accounting, deflated Sharpe, and risk backtests.
Value at Risk (VaR)
Value at Risk: the loss threshold you'll exceed with probability α. Why historical VaR is brittle and what it doesn't tell you about the tail.
Expected Shortfall (CVaR)
Expected shortfall: the average loss given a VaR breach. Why regulators are migrating from VaR and what ES catches that VaR misses.
Volatility
Volatility as the standard deviation of returns: realized vs implied, the annualization gotcha, and why volatility-of-volatility matters.