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Journal Articles Journal of Derivatives Year : 2008

A New Approach to Comparing VaR Estimation Methods

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Abstract

We develop a novel backtesting framework based on multidimensional Value-at-Risk (VaR) that focuses on the left tail of the distribution of the bank trading revenues. Our coverage test is a multivariate generalization of the unconditional test of Kupiec (Journal of Derivatives, 1995). Applying our method to actual daily bank trading revenues, we find that non-parametric VaR methods, such as GARCH-based methods or filtered Historical Simulation, work best for bank trading revenues.
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Dates and versions

hal-00854087 , version 1 (26-08-2013)

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Christophe Pérignon, R.D. Smith. A New Approach to Comparing VaR Estimation Methods. Journal of Derivatives, 2008, 16 (2), pp.54-66. ⟨10.3905/JOD.2008.16.2.054⟩. ⟨hal-00854087⟩

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