Asymptotic properties of duration-based VaR backtests

Malecka Marta ()
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Malecka Marta: Department of Statistical Methods, University of Lodz, Lodz, Poland

Statistics & Risk Modeling, 2022, vol. 39, issue 3-4, 49-73

Abstract: To increase the power of the VaR tests, it has been recently proposed to extend the duration-based test class with the geometric-VaR and Gini-coefficient-based tests. These tests, though exhibiting outstanding power properties, have not gained recognition in the industry. A potential reason is the absence of ready-to-use statistical distributions. To remedy this, we inquire into the limiting properties of these tests and derive relevant asymptotic distributions. We also provide a generalized geometric-VaR test and give its distribution. Through the Monte Carlo study, we show the accuracy of our asymptotic procedures in finite samples, and we find these procedures to be relevant for the current Basel standards. Our theoretical results are illustrated by the empirical study that includes data from the current COVID-19 crisis.

Keywords: VaR test; geometric test; geometric-VaR test; Gini coefficient; test size; test power (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1515/strm-2021-0019

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