# Question: Suppose that we back test a VaR model using 1 000 days

Suppose that we back-test a VaR model using 1,000 days of data. The VaR confidence level is 99% and we observe 15 exceptions. Should we reject the model at the 5% confidence level? Use Kupiec’s two-tailed test.

**View Solution:**## Answer to relevant Questions

The change in the value of a portfolio in three months is normally distributed with a mean of $500,000 and a standard deviation of $3 million. Calculate the VaR and ES for a confidence level of 99.5% and a time horizon of ...Values for the NASDAQ composite index during the 1,500 days preceding March 10, 2006, can be downloaded from the author’s web site. Calculate the one-day 99% VaR and the one-day 99% ES on March 10, 2006, for a $10 million ...A common complaint of risk managers is that the model-building approach (either linear or quadratic) does not work well when delta is close to zero. Test what happens when delta is close to zero in using Sample Application E ...Suppose that an investor owns the $10 million portfolio in Table 13.1 on September 30, 2014. The values of the four indices on that day were 17,042.90, 6622.7, 4,416.24, 16,173.52. The exchange rates on that day were:1.6211 ...Calculate DVA for the bank in Example 20.2. Assume that the bank can default in the middle of each month and that the default probability is 0.001 per month for the two years. Assume that the recovery rate for the ...Post your question