We define the vector of conditional coverage values generated over the business cycle by a constant capital figure. Using a convenient analytical framework, we explore its properties and propose two applications based on it. For the former, we state a result that links the concepts of...

We propose independence and conditional coverage tests which are aimed at evaluating the accuracy of Value-at-Risk (VaR) forecasts from the same model at different confidence levels. The proposed procedures are multilevel tests, i.e., joint tests of several quantiles corresponding to different...

Under the internal model approach (IMA) stipulated by Basel II, financial institutions are allowed to develop and employ proprietary internal models to evaluate various risk. However, the flexibility to develop a proprietary model leads to the question of which computing method delivers the most...