Following Kupiec (1995), Christoffersen (1998) proposes a complete methodology of evaluating the number of exceedances and their independence. All GARCH estimations are carried out with STATA that uses the Maximum Likelihood method of estimation. The null hypothesis of unconditional coverage is defined as LR POF, 0: EI t (q) q and tested via a simple test statistic. The other outcome of the paper is that the worst performers are Non-Linear Power GARCH and Non-Linear Power GARCH with a shift. The results reveal that the ARCH specification is the best performer followed by GARCH(1, 1) and the Student’s t distribution is slightly better than the Normal. Besides, we calculate Quadratic Losses to evaluate the GARCH specifications in calculating VaR. Then we compare the assessments of VaR with the realized returns by Kupiec and Christoffersen Tests. Starting with Christoffersen’s test for independent t I, we use the data of Exhibit 14.8 to calculate 00 105, 01 10 9 and 11 1. According to Kupiec test (and using the V a R definition) we know that the probability. Christoffersen, both conditional and unconditional, known as the Kupiec and Christoffersen tests, as well as the Pearson’s Q test for goodness of fit. Suppose that I backtest a V a R system for n days (for example 250), with a confidence interval of 1 (for example a 1 0.99, thus 0.01 ). Kupiec test rejects models earlier than the Basel II back test. I am currently analyzing the Kupiec test used for backtesting V a R. Christoffersen and Pelletier (2004) have developed a backtesting approach of the. testing (Kupiec, 1995), (Christoffersen, 1998), (Crnkovic and Drachman, 1997) (Lopez. We gather data of stock market indices from both emerging (Brazil and Turkey) and developed (Germany and the USA) markets, over the period of global financial crisis and make use of numerous GARCH specifications to return VaR values. The test of unconditional coverage, which has been proposed by Kupiec. This study is an attempt to compare a comprehensive list of GARCH models in quantifying risks of VaR under stress times.

Kupiec and christoffersen test