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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The TUFF test is also based on a likelihood ratio, but the underlying distribution is a geometric distribution.

It is unlikely that too many exceptions come from a correct VaR model.

You can help correct errors and omissions. Use Rt to denote the actual return or profit and loss observed on day t. Check on the provider’s web page whether it is in fact available. The corresponding VaR limits are also given in monetary units.

You can help adding them by using acfuracy form. If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. People studying for PhDs or in postdoctoral postdoc positions. Value-at-risk VaR is one of the main measures of financial risk. Returns represent the change in portfolio value as a proportion or percentage of its value on the previous day.


CiteULike: Techniques for Verifying the Accuracy of Risk Measurement Models

The critical value depends on the test confidence level. General contact details of provider: The corresponding VaR limits are also given as a proportion or percentage. Contacts Comment acheter Se connecter. Select the China site in Chinese or English for best site performance.

We will interpret your continued use of this site as your acceptance of our use of cookies. Overview of VaR Backtesting Market risk is the risk of losses in positions arising from movements in market prices. There are no reviews of this article.

The POF test works with the binomial distribution approach. From the properties of a binomial distribution, you can build a confidence interval for the expected number of exceptions.

Christoffersen proposed a test to measure whether the probability of observing an exception on a particular day depends on whether an exception occurred. For many portfolios, especially trading portfolios, VaR is computed daily. Financial Risk Manager Handbook. The TUFF test looks at when the first rejection occurred. The VaR limits must be produced from existing VaR models. If it happens too soon, the test fails the VaR model. Export in format suitable for direct import into delicious.

Accurxcy uses bibliographic data supplied by the respective publishers. All material on this site has been provided by the respective publishers and authors. As a best practice, use more than one criterion to backtest the performance of VaR models, because all tests have strengths and weaknesses. The most straightforward test is to compare the observed number of exceptions, xto the expected number of evrifying.


This statistic is asymptotically distributed as a chi-square variable with jupiec degrees of freedom, where x is the number of failures. Related Products We have identified the following relevant lab reagents.

Click the button below to return to fod English version of the page. You can use this daily data to assess the performance of VaR models, which is the acxuracy of VaR backtesting.

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Read about how we use cookies. For more information, see References for Jorion and bin. In addition, it uses a likelihood ratio to test whether the probability of exceptions is synchronized with the probability p implied by the VaR confidence level. If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item.

The probability is computed using a binomial distribution.