The Riskiness of Risk Models

We provide an economic valuation of the riskiness of risk models by directly measuring the impact of model risks (specification and estimation risks) on VaR estimates. We find that integrating the model risk into the VaR computations implies a substantial minimum correction of the order of 10-40% of VaR levels. We also present results of a practical method - based on a backtesting framework - for incorporating the model risk into the VaR estimates.

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Year of publication:	2011-03
Authors:	Boucher, Christophe ; Maillet, Bertrand
Institutions:	HAL
Subject:	Model risk \| quantile estimation \| VaR \| Basel II validation test

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Extent:	application/pdf
Series:	Post-Print.
Type of publication:	Book / Working Paper
Notes:	View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00587779
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010605338