backteting VaR

Discussion in 'P2.T8. Investment Management (15%)' started by shanlane, Mar 25, 2012.

  1. shanlane

    shanlane Active Member


    Thi may be a really silly question, but I just read the Risk Budgeting chapter and they have a brief VaR backteting model at the end of the chapter.

    The idea is easy enough and makes perfect sense. What I am wondering is: if the portfolio outperforms too often (outside the confidence interval, but on the upside; for instance a 99% confidence interval gives 1% return per day as the upper limit and we achieve 2% gains 20 times during a year) is this something that should still sound an alarm?



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