A New Approach to Comparing VaR Estimation Methods

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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Journal articles
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https://hal-hec.archives-ouvertes.fr/hal-00854087
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Submitted on : Monday, August 26, 2013 - 11:37:42 AM
Last modification on : Tuesday, January 16, 2018 - 5:56:01 PM

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

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