Modelling: validity of the FCT model

CatherineGaoCatherineGao
in CIA.FCT

Model Update: do retrospective test – compare prior base scenario projection to current data.

I do not understand how this validate updated model as it compares PRIOR model's projection to current financial results. It has nothing to do with updated model. Could you clarify?

Comments

  • Staff-T1Staff-T1

    It is just about continuity and sense checking - Your base scenario projections should not vary too much from a prior model vs an updated one

  • AndrewLAndrewL

    Hello,

    Can you please explain the difference between new and updated model validation?

    This is my take on it:

    1. New model: We have a new model at time t. Run the model with data up to t-1. Compare the actual and projections of result at tine t.

    2. For update model, suppose we have an old model at t-2 and update the model at time t. Here, we would use the OLD model and run the model with data up to time (t-2) and compare the projection of the Prior base model projection with current results at (t-1) and (t). Basically validating the old model would validate the new model since we are simply updating the model.

    Thanks,
    Andrew

  • Staff-T1Staff-T1

    Yeah that sounds right to me

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