ZM Financial Systems (ZMFS) recently received third-party Model Certification validation for both its flagship product, ZMdesk™, and its web-based solution, OnlineALM.com™, (Versions 4.50).
Certified by Velligan-Blaxall Consultants, LLC, (VBC) the full scope of the validation for both ZMdesk and OnlineALM.com includes:
- Discount Curve Construction
- Cashflow, Valuation and Income/Expense Components
- Servicing Model
- ZMUTP Prepayment Model
- Stochastic Modeling Capabilities
After reviewing technical aspects, VBC followed rigorous testing using proprietary financial models to replicate results under several scenarios with underlying assumptions. VBC concluded users of ZMdesk and OnlineALM.com models “can have confidence that the methodologies and results for the aforementioned components critical in monitoring and measuring interest rate risk are in-line with industry standards, accurate across a wide range of yield curve scenarios and consistent with model documentation. All model results were exactly replicated and no inaccuracies or material weaknesses were identified.”
VBC tested instruments using either the LiborSwap discount curve derived from Libor Cash, Futures and Swaps or the Treasury curve. Testing was performed on six instrument types: fixed rate bullet, fixed rate amortizing, adjustable rate amortizing, callable bond, step-callable bond and non-maturity deposit. All tests covered three interest rate scenarios: Base Implied Forward, +200 bps and -50 bps shock scenarios.
“With more than 1,500 institutions depending on our models to calculate risk and profitability, we actively pursue third-party verification,” said Butch Miner, CPA, CFA, co-founder, ZMFS. “This type of certification reinforces the confidence that our models meet industry standards and are accurate in their theoretical capabilities and mathematical calculations.”