De-Biasing Financial Models
By Francesca Bergamaschi, Anna Slodka-Turner, Steve Lindo
A featured article of our April 2020 edition of PRMIA's Intelligent Risk quarterly newsletter
A body of literature and social media has emerged in recent years, calling attention to the possibility that some models used by financial institutions to analyze risks and make important decisions may contain unintended biases. Proving or disproving the existence of unintended bias in a financial model and determining the potential negative consequences of such biases has been a challenge. In this article we argue that testing financial models for unintended biases may be a valuable component of model risk management.
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