By Rob Trippe, MBA, Financial Modelling Veteran
Financial model definitions can be tricky. Financial models are often dependent upon numerous functional areas and academic disciplines, such as accounting, finance and statistics. These disciplines may have differing uses of the same terminology. Model risk management has also drawn on numerous disciplines in its evolution. The result can be communicating at cross purposes.
No one academic discipline may lay claim to how a financial model’s terminology is defined. Financial model's output is often either a corporate finance concept or an accounting concept, while a driving calculation process may be statistical. Therefore, terminology should be defined among developers, owners and users as early as possible.