Benchmarking, Back-Testing, & Sensitivity Analysis

CECL is a financial accounting standard that requires all companies to estimate and record an allowance for expected credit losses on their financial asset portfolios, including loans and investments. In preparing a CECL estimate, companies develop models to help predict the estimated amounts. Benchmarking, back-testing, and sensitivity analyses are analysis techniques used in the context of modeling to evaluate the accuracy and robustness of the models used. These techniques are part of a model-risk management policy and are not part of the CECL standard specifically.