Backtesting
Mnuchin makes life harder for quants
Proposed CCAR changes make KVA calculations even more complex
Academic shines light on data mining in alternative beta
Sharpe ratios on complex products fall 73% compared with backtests
Statistical testing of DeMark technical indicators on commodity futures
This paper examines the performance of three DeMark indicators over twenty-one commodity futures markets and ten years of daily data.
Correctness of backtest engines
In this paper, the authors provide tools to test the correctness of backtest engines for setups with at most one entry and one exit.
A sound modelling and backtesting framework for forecasting initial margin requirements
Anfuso, Aziz, Loukopoulos and Giltinan propose a method to develop and backtest forecasting models for IM
Why multi-asset managers shouldn’t count on the past
Risk models are backward-looking but history won’t repeat itself
Beware simulation sins
Aspect Capital’s Stephen Wood picks out the most common pitfalls in simulations of quantitative investment strategies
Basel group shake-up has banks hoping for FRTB changes
Barger and Durand replaced by BoE's Nesbitt; banks want fresh look at P&L test
FRTB: Basel guidance on backtesting frustrates dealers
Dealers blast “illogical” carve-outs for backtesting exceptions
Stretched margins: growing pains for Simm
The standard initial margin model could become more strained as its use expands in 2017
Industry friction on initial margin model backtesting
NFA said to have set 10-day standard; other regulators applying different approach
See the error of your VARs
Commonly-used VAR estimation method shown to underestimate risk
The probability of backtest overfitting
The authors propose a general framework to assess the probability of backtest overfitting (PBO).
Value-at-risk bounds for multivariate heavy tailed distribution: an application to the Glosten–Jagannathan–Runkle generalized autoregressive conditional heteroscedasticity model
This paper aims to derive VaR bounds for the portfolios of possibly dependent financial assets for heavy tailed Glosten–Jagannathan–Runkle generalized autoregressive conditional heteroscedasticity processes using extreme value theory copulas.
The P&L attribution mess
FRTB model approval regime dogged by confusion and controversy
Research uncovers new sources of financial model risk
Past performance of financial models is no guarantee of future success, two forthcoming papers suggest
Capital sums set to drive FRTB desk decisions
Using Volcker desk structure may hurt model approval chances, banks say
Testing interest rate models for Solvency II applications
Alexey Botvinnik and Vladimir Ostrovski propose a validation method for interest rate models
Cutting Edge introduction: No more shortfalls?
Academics develop expected shortfall backtest to compare standardised and internal models
Expected shortfall is jointly elicitable with value-at-risk: implications for backtesting
Fissler, Ziegel and Gneiting investigate the role of elicitability in backtesting problems and show how comparative backtests can be implemented for expected shortfall
What is the best risk measure in practice? A comparison of standard measures
This paper revisits the properties of risk measures and checks VaR, ES and expectiles with regard to whether or not they enjoy these properties.
Backtesting Solvency II value-at-risk models using a rolling horizon
The author of this paper performs an analysis on a review of the equity stress parameter for Dutch pension funds.