exceptions

  1. Nicole Seaman

    P2.T5.22.7 Value at risk (VaR) backtest

    Learning objectives: Describe backtesting and exceptions and explain the importance of backtesting VaR models. Explain the significant difficulties in backtesting a VaR model. Verify a model based on exceptions or failure rates. Questions: 22.7.1. Mary the FRM conducts a backtest of her firm's...
  2. K

    P2.T5.R36 If model underestimates risk why would too little capital be allocated?

    Hi @David Harper CFA FRM Regarding P2.T5.R36 on page 3 of the Jorion Chapter 6 Study Notes about Backtesting & Exceptions I'm a bit confused by: "When too many exceptions are observed, the model is “bad” and underestimates risk. This is a major problem because too little capital may be...
  3. L

    Jorion Chapter 6 Question 10

    Hi David, For the Jorion question, can you provide the equation 6.3? Do we need to know this for the exam? Thanks Question 10: A bank reports 6 exceptions to its 99 percent VAR over the last year (252 days), including 4 that follow another day of exception. Compute the likelihood-ratio tests...
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