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Evaluating Power of Value-at-Risk Backtests
Company: Norwegian University of Science and Technology
Year Of Publication: 2012
Month Of Publication: June
Pages: 28
Download Count: 5
View Count: 1013
Comment Num: 0
Language: English
Source: thesis
Who Can Read: Free
Date: 6-18-2013
Publisher: Administrator
Summary
This paper presents an extensive study of the statistical power for the most recognized
backtests. The Geometric conditional coverage test by Berkowitz et al. (2011) performs best. A minimum amount of observations is needed to make inference with satisfying power. A sample size of 250 data points, which is the minimum requirement set by the Basel Committe on Banking Supervision (2011), is not sufficient. The common implementation of the Dynamic Quantile test, by Engle and Manganelli (2004), has a too high rejection rate for correctly specified VaR models.
Author(s)
Roynstrand, Torgeir Sign in to follow this author
Nordbo, Nils Petter Sign in to follow this author
Strat Vidar Kristoffer Sign in to follow this author
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