Principles and Practices of Model Risk Management

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

Authors: Charlie Lu · Peter Russo

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 SR 11-7. It covers the three lines of defense and the full model lifecycle—from model development to use, performance monitoring, remediation, and decommissioning.

Key topics

SR 11-7 compliance and 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.

MRM foundations and regulatory expectations (SR 11-7)
Governance and the three lines of defense
Model lifecycle management
Validation, effective challenge, and ongoing monitoring
Model inventory, identification, and change management
AI/ML and generative AI: risks, controls, and governance
Case studies: London Whale, LTCM, Subprime CDO

Resources

Download Charlie Lu bio (PDF)
Slides (coming soon)
Templates (coming soon)
Code notebooks (coming soon)
Errata (coming soon)

If the bio link returns a 404, double-check the file path and exact capitalization under assets/bios/ in the GitHub repo.

Contact

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

Tip: you can later add a simple contact form (Google Form) without needing backend code.