Multinomial Backtesting of Distortion Risk Measures
49 Pages Posted: 17 Feb 2022
We extend the scope of risk measures for which backtesting models are available by proposing a multinomial backtesting method for general distortion risk measures. The method relies on a stratification and randomization of risk levels. We illustrate the performance of our methods in numerical case studies.
Keywords: Distortion Risk Measures, Backtesting, Multinomial Tests, Solvency Capital, Internal Models
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