Authors: Bücher, Axel
Posch, Peter N.
Schmidtke, Philipp
Title: Using the extremal index for value-at-risk backtesting
Language (ISO): en
Abstract: We introduce a set of new Value-at-Risk independence backtests by establishing a connection between the independence property of Value-at-Risk forecasts and the extremal index, a general measure of extremal clustering of stationary sequences. We introduce a sequence of relative excess returns whose extremal index has to be estimated. We compare our backtest to both popular and recent competitors using Monte-Carlo simulations and find considerable power in many scenarios. In an applied section we perform realistic out-of-sample forecasts with common forecasting models and discuss advantages and pitfalls of our approach.
Subject Headings: VaR backtesting
risk measures
extremal index
Subject Headings (RSWK): Value at Risk
Statistischer Test
Issue Date: 2018
Appears in Collections:Sonderforschungsbereich (SFB) 823

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