The Riskiness of Risk Models

Christophe Boucher () and Bertrand Maillet

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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 Ñ based on a backtesting framework Ñ for incorporating the model risk into the VaR estimates

Keywords: Model risk; quantile estimation; VaR; Basel II validation test (search for similar items in EconPapers)
JEL-codes: C14 C50 G11 G32 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2011-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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ftp://mse.univ-paris1.fr/pub/mse/CES2011/11020.pdf (application/pdf)

Related works:
Working Paper: The Riskiness of Risk Models (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:11020

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