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2 - Validating Bank Holding Companies’ Value-at-Risk Models for Market Risk

Published online by Cambridge University Press:  02 March 2023

By
David Lynch
Edited by
David Lynch ,
Iftekhar Hasan  and
Akhtar Siddique
David Lynch
Affiliation:
Federal Reserve Board of Governors
Iftekhar Hasan
Affiliation:
Fordham University Graduate Schools of Business
Akhtar Siddique
Affiliation:
Office of the Comptroller of the Currency
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Summary

This chapter focuses on the three types of testing that banks are supposed to conduct for their VaR models. These are conceptual soundness, outcomes analysis and benchmarking. This chapter reviews how these three aspects of validation can be applied to VaR models of banks’ trading activities. In the case of backtesting and benchmarking it demonstrates how banks’ VaR models fare under some the backtesting and benchmarking tests.

Keywords

Market riskVaR models
Type
Chapter
Information
Validation of Risk Management Models for Financial Institutions
Theory and Practice
 , pp. 22 - 48
Publisher: Cambridge University Press
Print publication year: 2023

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