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Flashcards in Model Requirements Deck (5)
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1
Q

Timescale/budget

A

Should not be overly complex, otherwise will take up too much time to build and run or be unnecessarily expensive

2
Q

Realism

A

• Valid
• Rigorous enough for purpose
• Reflect risk profile of business, with approp inputs
o Eg discount rate should reflect level of risk associated with the business
• Parameters reflect features of business (eg term)
• Allow for all cashflows to/ from business (incl bonuses) including interactions between assets and liabilities
• May need to be stochastic
• Should allow for effect of reserving requirements
stochastic

3
Q

Checking and documentation

A

• Outputs should be verifiable
• Model should be adequately documented (incl limitations and key assumptions)
• Parameters should show sensitivity of results to key factors of business
o Eg renewal rates and new business volumes

4
Q

Communication

A

Model should produce results that can be communicated to the management/ shareholders/ regulator

5
Q

Future use

A
  • Should be possible to reuse the model for similar purposes
  • The model should be capable of development and refinement – nothing complex can be successfully designed and built in a single attempt. Also regulatory reqs may change in the future