exceptions

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...

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...