Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 725-745 |
| Number of pages | 21 |
| Journal | Journal of Financial Econometrics |
| Volume | 14 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - 1 Sep 2016 |
| Externally published | Yes |
Keywords
- Backtesting
- Duration
- Risk management
- Value at risk
- Volatility
Cite this
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The geometric-VaR backtesting method. / Pelletier, Denis ; Wei, Wei.
In: Journal of Financial Econometrics, Vol. 14, No. 4, 01.09.2016, p. 725-745.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - The geometric-VaR backtesting method
AU - Pelletier, Denis
AU - Wei, Wei
PY - 2016/9/1
Y1 - 2016/9/1
N2 - 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.
AB - 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.
KW - Backtesting
KW - Duration
KW - Risk management
KW - Value at risk
KW - Volatility
UR - https://www-scopus-com.ezproxy.lib.monash.edu.au/record/display.uri?eid=2-s2.0-84993970589&origin=resultslist&
U2 - 10.1093/jjfinec/nbv015
DO - 10.1093/jjfinec/nbv015
M3 - Article
VL - 14
SP - 725
EP - 745
JO - Journal of Financial Econometrics
JF - Journal of Financial Econometrics
SN - 1479-8409
IS - 4
ER -