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 POF test works with the binomial distribution approach. Based on your location, we recommend that veriffying select: The TUFF test is also based on a likelihood ratio, but the underlying distribution is a geometric distribution. Contacts Comment acheter Se connecter. Click the button below to return to the English version of the page.

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Catalog Record: Techniques for verifying the accuracy of risk | Hathi Trust Digital Library

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. By clicking “OK” you acknowledge that you have the right to distribute this file. Returns represent the change in portfolio value as a proportion or percentage of its value on the previous day. You can also specify a CiteULike article id. The performance of VaR models can be measured in different ways. You can help adding them by using this form. Read about how we use cookies.

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Value-at-risk VaR is one of the main measures of financial risk. This allows to link your profile to this item. Checking only the first exception leaves much information out, specifically, whatever happened after the first exception is ignored. In practice, many different metrics and statistical tests are used to identify VaR models that are performing poorly or performing better.

Check below whether another version of this item is available online. Home Citegeist Everyone’s Library. We have no references for this item. Some citation styles add the source URL, which you may not want. The TUFF test looks at when the first rejection occurred.

Choose a web site to get translated content where available and see local events and offers. For many portfolios, especially trading portfolios, VaR is computed daily.

Techniques for verifying the accuracy of risk measurement models

Januarypp. Export in format suitable for direct import into delicious. There are no reviews of this article. This page has been translated by MathWorks. Setup a permanent sync to delicious. For more information, see References for Jorion and bin. Translated by Mouseover text to see original. For more information, see References for Kupiec, pofand tuff. This is the p -value for the observed number of exceptions x. Profits and losses are expressed in monetary units and represent value changes in a portfolio.

Brought to you by AQnowledgeprecision products for scientists. By computing the probability of observing x exceptions, you can compute the probability of wrongly rejecting a good model when x exceptions occur.

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Kupiec introduced a variation on the binomial test called the proportion of failures POF test. People studying for PhDs or in postdoctoral postdoc positions. To insert individual citation into a bibliography in a word-processor, select your preferred citation style below and drag-and-drop it into the document.

Techniques for verifying the accuracy of risk measurement models

That is, any number of exceptions from 0 to xor the cumulative probability up to x. The probability is computed using a binomial distribution. Too few exceptions might be a sign that the VaR model is too conservative. Other MathWorks country sites are not optimized for visits from your location.

Check on the provider’s web page whether it is in fact available. Unlike the unconditional probability of observing an exception, Christoffersen’s test measures the dependency between consecutive days only.

Include unauthenticated results too may include “spam” Enter a search phrase. Techniques for verifying the accuracy of risk measurement models. This statistic is asymptotically distributed as a chi-square variable with x degrees of freedom, where x is the number of failures. If it happens too soon, the test fails the VaR model. Kuipec the China site in Chinese or English for best site performance.

The Journal of DerivativesVol.