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I want to backtest VaR models which are applied to portfolios of products which have maturities (options and futures) and even schedules (bonds). I have a question which never came up when backtesting VaR models for equity portfolios: is it adequate to roll the contract schedules/maturities backwards as I move backwards in time, in order to keep the maturity constant on each backtest date?

I have seen this implemented in someone else's code, but I have not seen it discussed in the literature and I don't know if it is standard practice. I would love it if anyone could share a reference which discusses the actual procedure to obtain VaR result on a backtest date in practice for non-equity portfolios.

Thank you!

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  • $\begingroup$ I'd say: YES, keep the time-to-maturity of your portfolio fixed by rolling it backwards to time. This way, you will of course introduce some (probably negligible) calendar effects. $\endgroup$ May 17 at 6:31

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