MVVM and nested view models

You are on the right track.

The parent model would naturally contain a list of child models, e.g. a customer having multiple orders.

When ParentViewModel is created and loaded by a third-party, it is passed a ParentModel. Then the ParentViewModel will:

1. Assign the ParentModel to a local variable
2. Create a ChildViewModel for each ChildModel by passing the
   ChildModel to the ChildViewModel constructor
3. Add each of those ChildViewModels to a list

By the way, you want

public List<ChildViewModel> ChildViewModels { get; set; }

to be

public ObservableCollection<ChildViewModel> ChildViewModels { get; set; }