Shadow model

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Financial modelling - audit and assurance.

Shadow models are a tool to obtain understanding and assurance about a financial model under review.

The shadow model reproduces the logic of the model under review.

The expectation is that, taking the same inputs as the model under review, the shadow model will produce the same outputs, using the same logic.

Any differences are investigated, corrected for, or explained.

Shadow modelling of this kind is a very robust way to gain a high degree of assurance and understanding about a financial model.

See also