Financial risk managers routinely use non-linear time series models to predict the downside risk of the capital under management. They also need to evaluate the adequacy of their model using so-called backtesting procedures. The latter involve hypothesis testing and evaluation of loss functions....

Risk management has long been recognized as an important component of the portfolio management process. Nonetheless, the effectiveness of portfolio risk management is often hampered by both an incomplete appreciation of the full potential of the risk management function and a limited...