Model Validation, a key role in risk management
Mathematicians Francesca Bergamaschi and Kristof Matolcsy are model validation experts, both working in the department of Model Risk Management. Francesca uses her expertise to validate models for the Economic Capital and Interest Rate Risk in the Banking Book, Kristof does the same for models concerning Trading and Counterparty Credit Risk.
We are the independent gatekeeper of the quality of ING’s models
While Kristof’s education was entirely focused on a career as a quantitative analyst in the financial world, Francesca’s destination seemed to be in an academic environment. It turned out differently for her: she started as a model developer of economic capital models at ABN Amro, in 2016. When she came across a job post for model validation at ING she was immediately intrigued and decided to give it a try. Kristof was offered a full-time position by ING while studying in the Netherlands as an exchange student. The combination of a study and a full-time job was quite challenging, but he managed to complete his studies and couldn’t be happier with his current job.
Francesca: “Risk management has always been and still is increasingly important for the bank. Model validation plays a key role in risk management, especially in the aftermath of the financial crisis: strategic decisions leverage on models and their outcome. In addition, there are regulatory requirements that we must meet. So, it is crucial that models are in good shape. Kristof and I are two of the people who contribute to ING’s ambition to have good and effective models.” Kristof: “Our task is to validate the models that our colleagues - the model development teams - make. A big part of our work is conception: reading reports, understanding complex models in different contexts, formulating opinions about the conceptual soundness of the models and make recommendations for improvement. Innovation and automation are becoming more and more prominent; in fact our team develops a new coding library for these purposes.”
No more quant in a corner
Francesca: “Another fundamental part of the job consists in effectively communicating our work to the stakeholders: the model developers, but also the users of the model. The time that a quant was working isolated in his or her own corner is long behind us. I cherish the communication part of my job and truly enjoy the business side and our advisory role. At the same time, we as model validators should maintain our independency to make sure that our challenger role is well-exercised, while adding value for the bank.” Kristof adds: “Independent analyses, thoroughness and expertise are also key for the regulator, another very important stakeholder.”
Keep on learning
Both Francesca and Kristof appreciate the learning aspect in their job. Francesca: “Every day I come across subjects that are new to me. It is a challenge to stay abreast of developments, both technical and in terms of content, but also when it comes to communicating effectively about rather technical subjects. Learning is a big deal for me, this is why I find my job so interesting.” Kristof: “The same goes for me. I’m always keen on learning new topics, and this position is all about learning. In our team, Model Validation, we get the chance to work in a variety of domains, with lots of different models which is super interesting and super challenging. We’re lucky with the environment we work in: I’ve been asking a lot of simple questions of various matters and our experienced teammates are always willing to take time for explanation. It helped me a lot to understand the fundamentals of my work in a very short period of time.” “So true,” Francesca adds. “There is a strong emphasis on giving each other positive feedback and getting better as a team. I believe this is a fantastic working environment!”
Francesca grew up in the Dolomites in Italy. She took up a study in mathematics, went to Padua for her bachelor, did her master’s in Paris and a double degree PhD in Montreal (Canada) and Leiden (the Netherlands). Francesca lives in Amsterdam, loves going to the cinema and trains in indoor climbing, swimming and running to keep in shape for her biggest passion: mountaineering. Whenever she gets the chance she returns to the Dolomites to exercise her sport.
Kristof was born and raised in Hungary, where he did a bachelor in mathematics and a master’s in actuarial and financial mathematics. Keen on learning new things, he recently took up a study in computer and data science. He used to ski as a semi-professional and was really enjoying it until the combination of an academic study and top sport became too demanding. Once in his new hometown Amsterdam, he switched from snow to water: swimming is his biggest fad now.