In order to qualify for IMA, the desk should path both Backtesting and P&L Attribution tests1 .
- The Backtesting assessment is designed to identify whether a bank’s trading desk risk management model includes a sufficient number of the risk factors that drive the trading desk’s daily P&L.
- The P&L attribution assessment is designed to compare whether the observed percentage of outcomes covered by the risk measure is consistent with both a 97.5% and 99% level of confidence.