Kupiec, P.H. () Techniques for Verifying the Accuracy of Risk Measurement Models. The Journal of Derivatives, 3, This paper presents a comparative evaluation of the predictive performance of conventional univariate VaR models including unconditional normal distribution. Request PDF on ResearchGate | Techniques for Verifying the Accuracy of Risk Management Models | Risk Paul Kupiec at American Enterprise Institute.
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Likes fof This copy of the article hasn’t been liked by anyone yet. Returns represent the change in portfolio value as a proportion or percentage of its value on the previous day.
If n is the number of days until the first rejection, the test statistic is given by. For more information, see References for Kupiec, pofand tuff. This page has been translated by MathWorks. CiteULike organises scholarly or academic papers or literature and provides bibliographic which means it makes bibliographies for techniquds and higher education establishments.
Corrections All material on this site has been provided by the respective publishers and authors. Groups Connections Recommendations Neighbours Watchlist. Tecgniques probability is computed using a binomial distribution. Techniques for verifying the accuracy of risk measurement models.
The most straightforward test is to compare the observed number of exceptions, xto the expected number of exceptions. All material on this site has been provided by the respective publishers and authors. For many portfolios, especially trading portfolios, VaR is computed daily.
You can help correct errors and omissions. The critical value depends on the test confidence level. The POF test works with the binomial distribution approach.
Checking only the first exception leaves much information out, specifically, whatever happened after the first exception is ignored. VaR is an estimate of how much value a portfolio can lose in a given time period with a given confidence level.
The Journal of DerivativesVol. If it happens too soon, the test fails the VaR model. The TUFF test looks at when the first rejection occurred. The binomial test is approximately distributed as a standard normal verifyong. Christoffersen proposed a test to measure whether the probability of observing an exception on a particular day depends on whether an exception occurred.
The VaR limits must be produced from existing VaR models. Perform a search for a similarly titled item that would be available. CiteULike is a free online bibliography manager. In addition, it uses a likelihood ratio to test whether the probability hhe exceptions is synchronized with the probability p implied by the VaR confidence level.
Overview of VaR Backtesting – MATLAB & Simulink – MathWorks France
Related Products We have identified the following relevant lab reagents. By computing the probability of observing x exceptions, you can compute the probability of wrongly rejecting a good model verifyinv x exceptions occur. The TUFF test is also based on a likelihood ratio, but the underlying distribution is a geometric distribution. People studying for PhDs or in postdoctoral postdoc positions. See general information about how to correct material in RePEc.
Kupiec Paul – Techniques for Verifying the Accuracy of Risk Measurement Models