Post by miriammuraba on Dec 23, 2011 7:52:44 GMT 4
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1965377_code1715697.pdf?abstractid=1965377&mirid=2
Backtesting Value-at-Risk: A Comparison between Filtered Bootstrap and Historical Simulation
Stefano Colucci
Symphonia Sgr
Dario Brandolini
Symphonia Sgr
November 28, 2011
Abstract:
The purpose of this paper is to present a comparison between two risk models for estimating VaR, Historical Simulation and Monte Carlo Filtered Bootstrap. We perform three tests, Unconditional Coverage, Independence and Conditional Coverage according to Christoffersen, P., Pellettier D. (2004) paper. We present results on both VaR 1% and VaR 5% on one day horizon for the two models for the following indices: Standard&Poors 500, Topix, Dax, MSCI United Kingdom, MSCI France, Italy Comit Globale, MSCI Canada, MSCI Emerging Markets, RJ/CRB. Our results show that Filtered Bootstrap Approach satisfy Conditional Coverage for all tested indices while Historical Simulation has many rejection cases. Finally we also tested in a regulatory framework (rolling window of 250 daily observations) the two models and the advantages of using a conditional coverage methodology to validate risk models.
Backtesting Value-at-Risk: A Comparison between Filtered Bootstrap and Historical Simulation
Stefano Colucci
Symphonia Sgr
Dario Brandolini
Symphonia Sgr
November 28, 2011
Abstract:
The purpose of this paper is to present a comparison between two risk models for estimating VaR, Historical Simulation and Monte Carlo Filtered Bootstrap. We perform three tests, Unconditional Coverage, Independence and Conditional Coverage according to Christoffersen, P., Pellettier D. (2004) paper. We present results on both VaR 1% and VaR 5% on one day horizon for the two models for the following indices: Standard&Poors 500, Topix, Dax, MSCI United Kingdom, MSCI France, Italy Comit Globale, MSCI Canada, MSCI Emerging Markets, RJ/CRB. Our results show that Filtered Bootstrap Approach satisfy Conditional Coverage for all tested indices while Historical Simulation has many rejection cases. Finally we also tested in a regulatory framework (rolling window of 250 daily observations) the two models and the advantages of using a conditional coverage methodology to validate risk models.