Second Pillar Consulting applies expert knowledge about risk, regulatory requirements (SR 11-7 or OCC 2011-12), econometric theory, quantitative techniques, and internal controls to model validations. Each of these skills is essential for a thorough financial model validation. Second Pillar Consulting's model validations fully comply with SR 11-7 to provide our clients with the highest quality independent assessment of their models.

Our model validations include analysis of:

  • Conceptual soundness and the economic theories underlying the design
  • Appropriateness of input data
  • Development strategy, developmental evidence, and model selection criteria
  • Quantitative techniques that evaluate the mathematical approaches used to project model results
  • Replication of all model results ensuring that the model functions as intended
  • Benchmarking model results to peer institutions
  • Outcomes analysis and reporting
  • Documentation and governance


Second Pillar Consulting has performed hundreds of model validations for some of the largest banks, financial institutions, and rating agencies in the country. Each model is unique to the exercise performed and the institution. Second Pillar Consulting customizes our model validation approach for each model and each institution.

We have validated a range of models, including:

  • Dodd-Frank Act Stress Testing (DFAST)
  • Credit risk rating
  • Credit default (loss) models
  • Pre-Provision Net Revenue (PPNR)
  • Allowance for Loan and Lease Losses (ALLL)
  • Capital allocation models
  • Aggregator models
  • Interest rate models:
    1. Heath-Jarrow-Morton
    2. Stochastic Alpha Beta Rho (SABR)
  • Option models:
    1. Binomial option pricing
    2. Option trading
  • Operational risk
  • Proprietary trading models


Our experts rely on the most sophistical statistical techniques and tools including:
Microsoft Excel, SAS, VBA, MATLAB, GAMS, LINDO, Java, C++, C#, Python, RATS

Econometric Software:
LIMDEP, NLOGIT, Shazam, Stata, R, StatTools, NumXL

Math Programming Software:
General Algebraic Modeling System (GAMS), Lindo, Lingo, Matlab, Mathematica, What's Best!

Please contact us to discuss our model validation services.

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Bill Nayda:
(804) 432-1629
11174 Lake Shore Ct.,
Glen Allen, VA 23059