Question: Suppose we back-test a VaR model using 1,000 days of historical data. The VaR confidence level is 99% and we observe very few exceptions where

Suppose we back-test a VaR model using 1,000 days of historical data. The VaR confidence level is 99% and we observe very few exceptions where losses exceed the VaR. Therefore, if we use the Kupiecs two-tailed test, we will most likely accept the model at the 5% significance level.

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