Would you start your career as a model validator in a major bank if you hope one day to become a front office quant?
@GARP_Risk @actuarynews
@Actuary_Dot_Org @actuarialpost
@iSixSigma @artemisbm @SOActuaries
@CQFInstitute @aier @CFAinstitute
Many Financial / Middle Office Risk and other Quantitative Economics/ Financial Market-led research roles interface at one level or the other across FIs.
I don't know if a bank uses Employee Rotation, to foster employee learning, training and development across the 3LOD Model?
But, most of the banks, in the Advanced Markets, to use job rotation as a tool, to disseminate professional knowledge and understanding of financial market operations, among their employees.
I started my career as a Derivatives Dealer in the front office, but later ended up in the Middle Office Risk Control Unit, and further onwards in my career, moved directly into the Front Office, as a Fund Portfolio Risk Controller
Model Risk Assessment and its Validation now exists as an independent function among most of the large banks, funds and insurance firms.
@BIS_org Guidelines issued over the years includes instructions, on how a bank should validate and stress test it’s Economic Capital, Stress Testing and other Pricing Models.
Hence, a GSIB - (Global Systematically Important Bank), ideally ought to develop Operational Risk Controls, to identify, measure, mitigate and monitor the Desks - wide Process and Transaction Level Risks, by outlining and explaining the following taxonomies for further processing
•Establishing the Model Risk Governance Architecture,

•Developing the Model Risk Parameters across different Model tiers,
•Overseeing the larger picture, by structuring the SPC -Statistical Process Control/s to ensure adherence to established Quality Standards and for further providing end to end Model Operational Risk Assurances,
•Highlight the Model Risk Appetite, Model Risk Tolerance Levels, Model Risk Thresholds, Model Risk Budgets, Model Risk Limits and validation and stress testing of the same,
•Structuring appropriate Model Detection(Diagnostic and Descriptive) and Prevention(Predictive and Prescriptive) Controls or Haircut/s, as part of the approved Model #Risk Management Policy,
•Which, last but not the least, should be made a part of the Integrated #ERM - Enterprise Risk Management Policy and Processes ( i.e. across the 3 tiers spreading out as the LOD - Lines of Defences) in general and the #ORM - Operational Risk Management Policy in particular.
How this sort of work experience, might push you into various probable Front Office Role/s, as a Treasury Rates Dealer, or an Equity Broker, or as a Fund Manager at an Asset Management Firm?

Well, difficult to say!
I have read job advertisements, on e- financial careers, where financial institutions, are hiring Front Office Model Risk Quants and Validation Experts, as part of the Risk Assessment Processes,
Board’s insistence on pro-actively and independently, testing Key Model Risk Controls with regard to the Key Model Risk Indicators, in order to meet the overall KPIs - assigned to each risk type and line of business activity across trading and hedging desk/s.
Additionally, the Central Bank Regulations on MRM - Model Risk Management, and the overall Basel Capital Adequacy Compliance Requirements and the Internal and External Audit Points are also helping to create momentum in favour of Model Risk Validation
and Cross-Validation Experts in different ways. Kindly note: That the Upcoming FRTB implementation, as part of the BASEL IV, is expected to create a further push into this direction.
#FRTB led Economic Capital Modeling will lead to Model Development and Frenzy like never seen before because of the extensive computational compulsions, which an FI shall be required to undertake to optimize model dashboard/s and market risks reporting frameworks.
Hence, there is no DIRECT relationship between the Front Office Trading and Model Validation Roles, as such; but it might inevitably be of benefit to a person, who walks into a dealing - room boxing ring, with an appropriate Operational Risk Management and Control background/s.
However, this sort of prior experiences, can INDIRECTLY, help the Dealer to understand the Controls, that might come into force due to (FRTB) Economic Capital Modeling, Risk Aggregation, Reporting and Regulatory Compliance Requirements across the P&L Desk Levels.

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