National Bureau of Economic Research (NBER)
Gert Loterman, Michiel Debruyne, Karlien Vanden Branden, Tony Van Gestel, Christophe Mues,
... The validation of an LGD model typically includes backtesting, which involves the process of evaluating to what ... estimates still correspond with the realized observations. Reported backtesting examples have typically been limited to simply measuring ... measurements alone. Although recent research led to advanced backtesting methods for PD models, the literature on similar backtesting methods for LGD models is much scarcer. This study addresses this literature gap by proposing a backtesting framework using statistical hypothesis tests to support the ...
Tópico(s): Imbalanced Data Classification Techniques
2014 - | The Journal of Risk Model Validation
National Bureau of Economic Research (NBER)
Susanne Emmer, Marie Kratz, Dirk Tasche,
... it has been criticized for issues relating to backtesting. In particular, ES has been found not to be elicitable, which means that backtesting for ES is less straightforward than, for example, backtesting for VaR. Expectiles have been suggested as potentially ... the caveats that apply to the estimation and backtesting of ES, it can be considered a good ... replacement of ES by expectiles in applications. For backtesting ES, we propose an empirical approach that consists ... which should allow us to make use of backtesting methods for VaR.
Tópico(s): Stochastic processes and financial applications
2015 - | The Journal of Risk
Susanne Emmer, Dirk Tasche, Marie Kratz,
... it has been criticised for issues relating to backtesting. In particular, ES has been found not to be elicitable which means that backtesting for ES is less straightforward than, e.g., backtesting for VaR. Expectiles have been suggested as potentially ... the caveats that apply to the estimation and backtesting of ES, it can be considered a good ... replacement of ES by Expectiles in applications. For backtesting ES, we propose an empirical approach that consists ... quantiles, which should allow to make use of backtesting methods for VaR.
Tópico(s): Insurance and Financial Risk Management
2013 - RELX Group (Netherlands) | SSRN Electronic Journal
Ngozi G. Emenogu, Monday Osagie Adenomon, Nwaze Obini Nweze,
... AVGARCH along with value at risk estimation and backtesting. We use daily data for Total Nigeria Plc ... innovations. This investigation of the volatility, VaR, and backtesting of the daily stock price of Total Nigeria ... not paid much attention to the application of backtesting as a primary approach. We found from the ... model. From the analysis of VaR and its backtesting, this study recommends shareholders and investors continue their ...
Tópico(s): Financial Risk and Volatility Modeling
2020 - Springer Nature | Financial Innovation
... a large amount of data, which makes the backtesting of these strategies very time consuming. This paper presents an efficient implementation of the backtesting of such a trading strategy using a parallel ... of intermediate results is very important for such backtesting problems. Our implementation can perform the backtesting within a reasonable time range so that the ...
Tópico(s): Distributed and Parallel Computing Systems
2005 - Springer Science+Business Media | Lecture notes in computer science
Yuanyuan Zhang, Saralees Nadarajah,
There have been many backtesting methods proposed for value at risk. Yet they have rarely been applied in practice. Here, we provide a comprehensive review of all of the recent backtesting methods for VaR. This review could encourage applications and also the development of further backtesting methods.
Tópico(s): Statistical Methods and Inference
2017 - Taylor & Francis | Communication in Statistics- Theory and Methods
... a comprehensive study of the performance of leading backtesting procedures for expected shortfall. The tests differ in ... sensitivity to the sample sizes (both estimation and backtesting), and computational burden. The best performing scenario depends on the interaction between estimation error and backtesting error. We document that the speed of convergence ...
Tópico(s): Financial Risk and Volatility Modeling
2021 - Taylor & Francis | Quantitative Finance
Felix Moldenhauer, Marcin Pitera,
We propose a new backtesting framework for expected shortfall (ES) that can be used by regulators. Instead of looking at estimated capital reserve and realized ... confidence level, we introduce a natural and efficient backtesting framework. Our test statistics is given by the ... quantity can be used to construct an efficient backtesting framework for unconditional coverage of ES in a ...
Tópico(s): Credit Risk and Financial Regulations
2019 - | The Journal of Risk
Adriano Koshiyama, Nick Firoozye,
... must determine a large array of trading parameters. Backtesting, the attempt to identify the appropriate parameters using ... devising schemes for preventing what is known as backtesting overfitting). So far, many financial researchers have proposed ... covariance-penalties are a suitable procedure to avoid backtesting overfitting, and total least squares provides superior performance ...
Tópico(s): Advanced Statistical Methods and Models
2019 - | The Journal of Financial Data Science
Backtesting counterparty credit risk (CCR) models is anything but simple. Such backtesting is becoming increasingly important in the financial industry ... guidelines from regulators on how to perform this backtesting. This is in contrast to market risk models, ...
Tópico(s): Credit Risk and Financial Regulations
2014 - | The Journal of Credit Risk
This paper presents a backtesting exercise involving several value-at-risk (VaR) models for measuring market risk in a dynamic context.The focus is on ... the performance of the models, we implement a backtesting procedure using the log losses of a diversified sample of fifteen financial assets. The backtesting analysis covers the period from March 2004 to ... the turmoil of the last part of the backtesting period, so that they seem to be efficient ...
Tópico(s): Market Dynamics and Volatility
2012 - | The Journal of Risk Model Validation
... assumed model is correct. This procedure is called backtesting. There are many different tests available, but usually ... of this paper is to analyze some chosen backtesting methods focusing on the problem of power of ... obtained results and gives hints for the optimal backtesting.
Tópico(s): VLSI and Analog Circuit Testing
2009 - Springer Nature | Studies in classification, data analysis, and knowledge organization
Juan Carlos Escanciano, José Olmo,
... of-sample forecast accuracy of the VaR model (backtesting procedures) have become of crucial practical importance. In ... the use of the standard unconditional and independence backtesting procedures to assess VaR models in out-of- ... dynamic parametric VaR models and to correct standard backtesting procedures to provide valid inference in out-of- ...
Tópico(s): Monetary Policy and Economic Impact
2009 - Taylor & Francis | Journal of Business and Economic Statistics
Juan Carlos Escanciano, José Olmo,
... of-sample forecast accuracy of the VaR model (backtesting procedures) have become of crucial practical importance. In ... the use of the standard unconditional and independence backtesting procedures to assess VaR models in out-of- ... dynamic parametric VaR models and to correct standard backtesting procedures to provide valid inference in out-of- ...
Tópico(s): Market Dynamics and Volatility
2008 - RELX Group (Netherlands) | SSRN Electronic Journal
... accuracy of value-at-risk (VAR) measures. These backtesting procedures are reviewed from both a statistical and ... and independence are defined and their relation to backtesting procedures is discussed. Backtests are then classified by ...
Tópico(s): Statistical Methods in Clinical Trials
2007 - | The Journal of Risk
... adequacy of Value-at-Risk (VaR) measures. These backtesting procedures are reviewed from both a statistical and ... and independence are defined and their relation to backtesting procedures is discussed. Backtests are then classified by ...
Tópico(s): Statistical Distribution Estimation and Applications
2005 - | Finance and Economics Discussion Series
Financial risk model evaluation or backtesting is a key part of the internal model's approach to market risk management as laid out by the Basle Committee on Banking Supervision. However, existing backtesting methods have relatively low power in realistic small ... contribution is the exploration of new tools for backtesting based on the duration of days between the ...
Tópico(s): Stochastic processes and financial applications
2004 - Oxford University Press | Journal of Financial Econometrics
Peter Christoffersen, Denis Pelletier,
Financial risk model evaluation or backtesting is a key part of the internal model's approach to market risk management as laid out by the Basle Commitee on Banking Supervision (1996). However, existing backtesting methods such as those developed in Christoffersen (1998), ... is the exploration of a new tool for backtesting based on the duration of days between the ...
Tópico(s): Stochastic processes and financial applications
2003 - RELX Group (Netherlands) | SSRN Electronic Journal
Michael C. S. Wong, Wai Yan Cheng, Clement Yuk Pang Wong,
Abstract This paper adopts the backtesting criteria of the Basle Committee to compare the performance of a number of simple Value‐at‐Risk (VaR) models. These criteria ... models. These models must comply with Basle's backtesting criteria. If a bank fails the VaR backtesting, higher capital requirements will be imposed. VaR is ... VaR models consistently fail to meet Basle's backtesting criteria. These findings suggest that the use of ...
Tópico(s): Financial Markets and Investment Strategies
2002 - Wiley | Journal of Forecasting
Pablo Durán Santomil, Luís Otero González, Onofre Martorell Cunill, José M. Merigó,
Backtesting is a technique for validating internal models under Solvency II, which allows for evaluating the discrepancies ... real observations. This paper aims to establish various backtesting tests and to show their applications to equity ... year time horizon. The proposed methodology performs the backtesting of annualized returns arising from the accumulation of ... the problems inherent in the out-of-sample backtesting proposed by the regulator.
Tópico(s): Financial Markets and Investment Strategies
2018 - Elsevier BV | Journal of Business Research
Muneer Shaik, Lakshmi Padmakumari,
... their predictive performance by applying a series of backtesting methods on BRICS (Brazil, Russia, India, China, South ... exponential weighted moving average (EMWA) procedures, and eight backtesting models. The empirical analysis is conducted during three ...
Tópico(s): Financial Markets and Investment Strategies
2022 - Business Perspectives | Investment Management and Financial Innovations
Xue Dong He, Steven Kou, Xianhua Peng,
... on issues such as subadditivity, robustness, elicitability, and backtesting. We also aim to clarify some misconceptions and ... considerations such as capturing tail risk, robustness, elicitability, backtesting, and surplus invariance. Expected final online publication date ...
Tópico(s): Stochastic processes and financial applications
2021 - Annual Reviews | Annual Review of Statistics and Its Application
... BRICS) and gold returns. Second, it conducts different backtesting procedures forecasts. Third, it focuses on the hedging ... market indices and gold returns. They conduct different backtesting procedures of the 1% and 5%-value-at- ... on the other hand. Findings When conducting different backtesting procedures of VaR, our finding suggests that Bitcoin ...
Tópico(s): Blockchain Technology Applications and Security
2021 - Emerald Publishing Limited | International Journal of Emerging Markets
Georgiana-Denisa Banulescu, Christophe Hurlin, Jérémy Leymarie, Olivier Scaillet,
This paper proposes an original approach for backtesting systemic risk measures. This backtesting approach makes it possible to assess the systemic risk measure forecasts used to identify the financial institutions that ...
Tópico(s): Insurance and Financial Risk Management
2020 - Institute for Operations Research and the Management Sciences | Management Science
Christian T. Brownlees, André B.M. Souza,
We conduct an out-of-sample backtesting exercise of Growth-at-Risk (GaR) predictions for 24 OECD countries. We consider forecasts constructed from quantile regression and GARCH models. The ... GDP, including the national financial conditions index. The backtesting results show that quantile regression and GARCH forecasts ...
Tópico(s): Global Financial Crisis and Policies
2020 - Elsevier BV | Journal of Monetary Economics
Daniel Velásquez-Gaviria, Andrés Mora‐Valencia, Javier Perote,
... impact on financial downside risk. This article implements backtesting techniques to estimate and validate the value-at- ... Generalized Error or Skew-Generalized Error distributed innovations. Backtesting performance is tested through traditional Kupiec and Christoffersen tests for VaR, but also through recent backtesting ES techniques. The paper extends these tests to ...
Tópico(s): Financial Markets and Investment Strategies
2020 - Multidisciplinary Digital Publishing Institute | Energies
Christian T. Brownlees, André B.M. Souza,
We conduct an out-of-sample backtesting exercise of Growth-at-Risk (GaR) predictions for 24 OECD countries. We consider forecasts constructed from quantile regression and GARCH models. The ... GDP, including the national financial conditions index. The backtesting results show that quantile regression and GARCH forecasts ...
Tópico(s): Economic Policies and Impacts
2019 - RELX Group (Netherlands) | SSRN Electronic Journal
Nick Costanzino, Michael Curran,
We propose a Traffic Light approach to backtesting Expected Shortfall which is completely consistent with, and analogous to, the Traffic Light approach to backtesting VaR (Value at Risk) initially proposed by the ...
Tópico(s): Transportation Planning and Optimization
2018 - Multidisciplinary Digital Publishing Institute | Risks