The theory we used to proceed our backtesting is that the expected number of breaches m which the actual loss exceeds the forecasted the value at risk is n(1 - [alpha]) if the
value at risk model is actual.
Additional models were developed using the FINCAD F3 analytics package to build an internal historical
value at risk model in order to calculate IM according to the BCBS/IOSCO guidelines.
The theory we used to proceed our back testing is that the expected number of breaches m which the actual loss exceeds the forecasted the value at risk is n(1 - [alpha]) if the
value at risk model is actual.
Value at Risk model, enabling us to determine the value which is at risk, has already found its way to the list of needs investors and financial institutions created.
Under this new regulatory approach CSFB Capital is allowed to calculate its capital charges for market and credit risk based on the Firm's internal
value at risk model.
2001),
Value at Risk Models In Finance, European Central Bank.
For example, a misunderstanding of the strengths and weaknesses of
Value at Risk models may have led leadership at multiple financial institutions to become overconfident and overly reliant on models in decision-making.
In conjunction with developing all risk measurement models, such as market value at risk and credit
value at risk models, they were charged with bringing together, cleaning and maintaining a financial rates database that would include market and credit market data from many different sources.
1996, "Evaluation of
Value at Risk Models Using Historical Data," Federal Reserve Bank of New York Economic Review (April), 39-70.
