Publication:
Pitfalls in backtesting historical simulation VaR models

Simple item page
dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorEscanciano, Juan Carlos
dc.contributor.authorPei, Pei
dc.contributor.funderMinisterio de Educación y Ciencia (España)es
dc.date.accessioned2022-06-14T14:39:36Z
dc.date.available2022-06-14T14:39:36Z
dc.date.issued2012-08-01
dc.description.abstractHistorical Simulation (HS) and its variant, the Filtered Historical Simulation (FHS), are the most popular Value-at-Risk forecast methods at commercial banks. These forecast methods are traditionally evaluated by means of the unconditional backtest. This paper formally shows that the unconditional backtest is always inconsistent for backtesting HS and FHS models, with a power function that can be even smaller than the nominal level in large samples. Our findings have fundamental implications in the determination of market risk capital requirements, and also explain Monte Carlo and empirical findings in previous studies. We also propose a data-driven weighted backtest with good power properties to evaluate HS and FHS forecasts. A Monte Carlo study and an empirical application with three US stocks confirm our theoretical findings. The empirical application shows that multiplication factors computed under the current regulatory framework are downward biased, as they inherit the inconsistency of the unconditional backtest.en
dc.description.sponsorshipResearch funded by the Spanish Plan Nacional de I + D + I, reference number SEJ2007 62908.en
dc.identifier.bibliographicCitationEscanciano, J. C., & Pei, P. (2012). Pitfalls in backtesting Historical Simulation VaR models. Journal of Banking & Finance, 36 (8), pp. 2233-2244.en
dc.identifier.doihttps://doi.org/10.1016/j.jbankfin.2012.04.004
dc.identifier.issn0378-4266
dc.identifier.publicationfirstpage2233es
dc.identifier.publicationissue8es
dc.identifier.publicationlastpage2244es
dc.identifier.publicationtitleJOURNAL OF BANKING & FINANCEen
dc.identifier.publicationvolume36es
dc.identifier.urihttps://hdl.handle.net/10016/35117
dc.identifier.uxxiAR/0000029598
dc.language.isoenges
dc.publisherElsevieres
dc.relation.projectIDGobierno de España. SEJ2007-62908es
dc.rights© Elsevier, 2012es
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España*
dc.rights.accessRightsopen accessen
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/*
dc.subject.ecienciaEconomíaes
dc.subject.jelC52
dc.subject.jelC32
dc.subject.jelG21
dc.subject.jelG32
dc.subject.otherBacktestingen
dc.subject.otherBasel accorden
dc.subject.otherRisk managementen
dc.subject.otherValue-at-risken
dc.subject.otherConditional quantileen
dc.subject.otherMarket risk capital requirementsen
dc.titlePitfalls in backtesting historical simulation VaR modelsen
dc.typeresearch article*
dc.type.hasVersionAM*
dspace.entity.typePublication
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
pitfalls_JBF_2012_ps.pdf
Size:
479.53 KB
Format:
Adobe Portable Document Format
Download
Collections
DE - Artículos de Revistas