The geometric-VaR backtesting method

Denis Pelletier, Wei Wei

Research output: Contribution to journalArticleResearchpeer-review

7 Citations (Scopus)


This article develops a new test to evaluate value-at-risk (VaR) forecasts. VaR is a standard risk measure widely utilized by financial institutions and regulators, yet estimating VaR is a challenging problem, and popular VaR forecast relies on unrealistic assumptions. Hence, assessing the performance of VaR is of great importance. We propose the geometric-VaR test which utilizes the duration between the violations of VaR as well as the value of VaR. We conduct a Monte Carlo study based on desk-level data and we find that our test has high power against various alternatives.
Original languageEnglish
Pages (from-to)725-745
Number of pages21
JournalJournal of Financial Econometrics
Issue number4
Publication statusPublished - 1 Sep 2016
Externally publishedYes


  • Backtesting
  • Duration
  • Risk management
  • Value at risk
  • Volatility

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