It can be used to analyze, backtest, and optimize investment portfolios, taking into account turnover, transaction costs, semi-continuous constraints, and defined minimum or maximum number of assets.

Amidst the current market turmoil due to the COVID-19 pandemic, it is timely to examine the performance of different Value-at-Risk (VaR) models over the long-term and in previous times of crisis.

Consider a credit portfolio that consists of default-sensitive instru¬ments such as lines of credit, corporate bonds, and government bonds. The corresponding credit value-at-risk (VaR), is the minimum ...

Backtesting is an essential component of the implementation and operation of any risk model. As perhaps the most well-known market risk metric, value at-risk (VaR) has received regulatory, industry ...

This paper aims to reflect the current state of the discussion on the validation of market risk forecasts by means of backtesting. Due to the upcoming Fundamental Review of the Trading Book (FRTB), ...

The main result is that the only risk measures that satisfy a set of economic axioms for the Choquet expected utility and the statistical property of general elicitability (i.e., there exists an ...

Huge Returns at Low Risk? Not So Fast The wild world of 'backtesting'—and why investors need to be on guard.

J. Carlos Escanciano, Jose Olmo, Backtesting Parametric Value-at-Risk With Estimation Risk, Journal of Business & Economic Statistics, Vol. 28, No. 1 (January 2010), pp. 36-51 ...

The implementation of a new Value-at-Risk model looks to have masked a US$2bn mark-to-market loss that built up in JP Morgan's chief investment office over the past few months.