A Note About Calibration Tests for VaR and ES

Luiz Hotta (), Carlos Trucíos () and Mauricio Zevallos
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Luiz Hotta: Institute of Mathematics, Statistics and Scientific Computing, Universidade Estadual de Campinas (UNICAMP)

A chapter in Time Series and Wavelet Analysis, 2024, pp 59-80 from Springer

Abstract: Abstract This paper assesses the performance of several calibration tests developed in the recent years to evaluate the forecasting ability of two risk measures commonly used in practice, namely, the value-at-risk (VaR) and expected shortfall (ES). The assessment is made through Monte Carlo experiments on models, with the most popular class of volatility models. The size and power of every test are evaluated under different scenarios considering both normal and Student-t innovation distributions. We also illustrate the application of the calibration tests to two time series of daily financial returns.

Keywords: GARCH; Model misspecification; Risk measures; Value-at-risk; Expected shortfall (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-66398-7_4

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DOI: 10.1007/978-3-031-66398-7_4

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