Weiß, Gregor N.F.
|Title:||A new set of improved value-at-risk backtests|
|Abstract:||We propose a new set of formal backtests for VaR-forecasts that significantly improve upon existing backtesting procedures. Our new test of unconditional coverage can be used for both directional and non-directional testing and is thus able to test separately whether a VaR-model is too conservative or underestimates the actual risk exposure. Second, we stress the importance of testing the property of independent and identically distributed (i.i.d.) VaRexceedances and propose a simple approach that explicitly tests for the presence of clusters in VaR-violation processes. Results from a simulation study indicate that our tests significantly outperform competing backtests in several distinct settings. In addition, the empirical analysis of a unique data set consisting of asset returns of an asset manager’s portfolios underline the usefulness of our new backtests especially in times of market turmoil.|
Monte Carlo simulation
|Appears in Collections:||Sonderforschungsbereich (SFB) 823|
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|DP_2913_SFB823_Ziggel_Berens_Weiß_Wied.pdf||DNB||390.69 kB||Adobe PDF||View/Open|
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