What is the primary difference between model validation and model monitoring under SR 11-7?
A core Risk & Compliance interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
Model validation is an independent, one-time assessment of a model's conceptual soundness, outcomes, and ongoing monitoring plan, typically done before deployment or periodically. Model monitoring is an ongoing process to confirm that the model remains fit for use, tracking performance metrics, data quality, and assumptions. Validation is a point-in-time evaluation; monitoring is continuous.
WHAT INTERVIEWERS LISTEN FOR
- ✓Validation is point-in-time independent assessment
- ✓Monitoring is ongoing performance tracking
- ✓Validation covers conceptual soundness
- ✓Monitoring identifies deterioration
COMMON MISTAKES
- ✗Confusing the two as identical
- ✗Saying validation is done only once
- ✗Ignoring that monitoring feeds into re-validation
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