Some Results on Foreign Equity Portfolio Risk Backtesting via Lévy Ordinary Copula Model
Kresta Aleš, Tichý Tomáš
Keywords:
backtesting, market risk, model validation, subordinated Lévy model, ordinary elliptical copula
function.
Abstract:
The soundness of risk monitoring and measuring systems is a key point for the reliability of
financial institutions. One of the features of a reliable risk model is that it passes a backtesting
procedure – a comparison of the one step ahead risk estimation and a true loss occurred on a
given day – without any troubles. Within this paper, basic tests to backtesting procedure due to
Kupiec, Christoffersen and Haas are applied on a portfolio sensitive to equity and FX rate risk.
In particular details, we focus on NIG model and its variants due to various time spans used
for parameter estimation. We document a significant improvement of such tail risk models on
several portfolio positions.
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10.7441/joc.2012.02.06
Kresta, A., Tichý, T.(2012). Some Results on Foreign Equity Portfolio Risk
Backtesting via Lévy Ordinary Copula Model. Journal of Competitiveness, 4 (2), 85-96. https://doi.org/10.7441/joc.2012.02.06
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