Principles and Practices of Model Risk Management

A practical textbook for financial engineering students and model risk practitioners.

Authors: Charlie Lu · Peter Russo

Contact Resources Contents

Book page and supporting materials. Purchase links and downloadable resources will be added as they become available.

About the book

Principles and Practices of Model Risk Management provides an end-to-end framework for designing, operating, and improving an MRM program aligned with current model risk management guidance and supervisory expectations, including the Federal Reserve's SR 26-2. It covers the three lines of defense and the full model lifecycle—from model development to use, performance monitoring, remediation, change management, and decommissioning.

Key topics

  • SR 26-2 and current model risk governance expectations
  • Three lines of defense for MRM
  • Model lifecycle (“cradle to grave”)
  • Model development standards
  • Effective challenge and independent model validation
  • Model governance and control framework
  • Model use, outcomes analysis, and performance monitoring
  • Model risk identification, remediation, and compensating controls
  • Model inventory, taxonomy, and Model Identification Tool
  • AI/ML and generative AI model risk management

Contents (preview)

We’ll publish a full table of contents and sample materials here.

Resources

Additional chapter study guides, case studies, Python notebooks, instructor materials, and supporting resources will be added as they become available.

Contact

For questions, corrections, or instructor requests:
Charlie Lu: changnian.lu@gmail.com
Peter Russo: plr27@columbia.edu

Instructor resources and additional teaching materials will be added as the book project develops.

© Charlie Lu and Peter Russo