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Can I do back testing and stress testing in TransRisk?

April 26, 2017stress Testing transrisk

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Can I do back testing and stress testing in TransRisk?

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Yes. With back testing, you can assess the accuracy of the VaR model in predicting losses on your positions / portfolio. i.e. for a 95% VaR, the losses on your position should not exceed VaR number by more than 5 out of 100 days. Stress testing will allow you to view the impact of unforeseen catastrophic events on your portfolio value. This can be done by applying the volatilities and correlations during historical stress scenarios like 9/11, market crashes etc. to your current portfolio and seeing the expected losses on your portfolio.