  Model risk has a huge impact on any risk measurement procedure and its
quantification is therefore a crucial step. In this paper, we introduce three
quantitative measures of model risk when choosing a particular reference model
within a given class: the absolute measure of model risk, the relative measure
of model risk and the local measure of model risk. Each of the measures has a
specific purpose and so allows for flexibility. We illustrate the various
notions by studying some relevant examples, so as to emphasize the
practicability and tractability of our approach.
