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The Riskiness of Risk Models

Christophe Boucher () and Bertrand Maillet

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We provide an economic valuation of the riskiness of risk models by directly measuring the impact of model risks (specification and estimation risks) on VaR estimates. We find that integrating the model risk into the VaR computations implies a substantial minimum correction of the order of 10-40% of VaR levels. We also present results of a practical method - based on a backtesting framework - for incorporating the model risk into the VaR estimates.

Keywords: Risque de modèle; estimation de quantiles; Bâle II.; Model risk; quantile estimation; VaR; Basel II validation test. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-ban, nep-ecm, nep-fmk, nep-rmg and nep-upt
Date: 2011-03
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00587779
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Published in Documents de travail du Centre d'Economie de la Sorbonne 2011.20 - ISSN : 1955-611X. 2011

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