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When you backtest VaR, you are essentially backtesting your model. You are essentially saying: "If I had this model back in 2007, what would be its calculated VaR?" The model is tested given all available information up to that time. A good model will adapt given new data and the VaR will change after an extreme event. Even one data point should make a ...


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To add an important point to existing answers, the overall portfolio beta should be 0. The usual motivation of a long short strategy is to invest in a portfolio that captures your view of individual equities, but is immune to overall market movements. For example you have reason to believe that MSFT is going to perform better than HP, but you do not want ...


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You should first determine whether you want to look at relative or absolute returns. You may want to use position weights relative to the benchmark rather than market value if interested in relative value. For absolute returns consider your three components (long, short and cash - where cash includes borrowing, other costs and in/out flows) P&L and ...


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If you do step 1 and step 2 every day, then you indeed assume that you rebalance the strategy every day. If you want to assume differently, for example monthly, you need to first compound the returns for each asset separately during the whole month and then do a weighted sum of the compounded returns using the weights of each asset at the beginning of the ...


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I subscribed recently to ActiveTick, primarily because of the Excel add-in they offer. The ability to feed real time data into Excel equations sounded really promising, but what I have found is a service that is incredibly unreliable. I’ve been sitting here for the last 5 hours watching the add-in try to connect with the server, but no luck. This is about ...



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