Within an internal model the Economic Scenario Generator (ESG) is an important component. In orderto get a regulatory approval of an internal model it is required that the implemented models (must be) passeda rigorous validation process, see Ceiops [2009].In this paper we focus on the particular...

This paper analyzes and quantifies the idea of model risk in the environment of internal modelbuilding. We define various types of model risk including estimation risk, model risk in distributionand model risk in functional form. By the quantification of these concepts we analyzethe impact of...