Description Usage Arguments References Examples
A method that performs backtest for VaR models using the TL approach. According to Basel, a VaR model is deemed valid if the cumulative probability of observing up to n_f failures is less than 0.95 (green zone) under the binomial distribution with n (sample size) and Var level as the parameters. If the cumulative probability is between 0.95 and 0.9999 a VaR model is in yellow zone. Otherwise (>0.9999) a VaR model is in red zone.
1 2 3 4 |
y |
The time series to apply a VaR model (a single asset rerurn or portfolio return). |
n |
If |
no_fail |
If |
VaR |
The forecast VaR. |
VaR_level |
The VaR level, typically 95% or 99%. |
Basle Committee on Banking Supervision (1996). "Supervisory Framework for the Use of ‘Backtesting’ in Conjunction with the Internal Models Approach to Market Risk Capital Requirements".
1 2 3 4 5 6 7 8 9 10 | pw.CCC.obj = new("simMGarch")
pw.CCC.obj@d = 10
pw.CCC.obj@n = 1000
pw.CCC.obj@changepoints = c(250,750)
pw.CCC.obj = pc_cccsim(pw.CCC.obj)
y_out_of_sample = t(pw.CCC.obj@y[,900:1000])
w=rep(1/pw.CCC.obj@d,pw.CCC.obj@d) #an equally weighted portfolio
#VaR = quantile(t(pw.CCC.obj@y[,1:899])%*%w,0.05)
#ts.plot(y_out_of_sample%*%w,ylab="portfolio return");abline(h=VaR,col="red")
#TL(y=y_out_of_sample%*%w,VaR=rep(VaR,100),VaR_level = 0.95)
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