Backtesting methods are statistical tests designed to uncover excessive risk-taking from financial institutions. We show in this paper that these methods are subject to the presence of model risk produced by a wrong specification of the conditional VaR model, and derive its effect on the...

Grounded on the concept of cointegration, this paper develops a novel test of time series convergence between pairs of unit root processes. The test (i) does not require the estimation of the cointegration coeffcient, (ii) is robust to general forms of weak dependence in the transitory...