I'm going to perform a backtest on two VaR models on a very large dataset (+50.000 values). Normally, I would use the Christoffersen LR test but in my case, due to the very large number of observation, I'm afraid that the LR statistics would be 0/0, regardless of the empirical fraction of VaR failures (which is close to 2.8% at 1% VaR). So, I raised some doubts about my knowledge of the test... does it make sense to think this way or am I thinking wrong? Eventually, do you think is there another test that would fit my case? Thanks!


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.