Backtesting an equity risk model under Solvency II

Durán Santomil, P; Otero González, L; Martorell Cunill, O; Merigó Lindahl, JM

Backtesting an equity risk model under Solvency II

Durán Santomil, P Otero González, L Martorell Cunill, O Merigó Lindahl, JM

Permalink

Publication Type:: Journal Article
Citation:: Journal of Business Research, 2018, 89 pp. 216 - 222
Issue Date:: 2018-08-01

Closed Access

	Filename	Description	Size
	1-s2.0-S0148296318300043-main.pdf	Published Version	400.54 kB	Adobe PDF	View/Open

Copyright Clearance Process

Recently Added
In Progress
Closed Access

This item is closed access and not available.

Full metadata record

Field	Value	Language
dc.contributor.author	Durán Santomil, P	en_US
dc.contributor.author	Otero González, L	en_US
dc.contributor.author	Martorell Cunill, O	en_US
dc.contributor.author	Merigó Lindahl, JM https://orcid.org/0000-0002-4672-6961	en_US
dc.date.issued	2018-08-01	en_US
dc.identifier.citation	Journal of Business Research, 2018, 89 pp. 216 - 222	en_US
dc.identifier.issn	0148-2963	en_US
dc.identifier.uri	http://hdl.handle.net/10453/130142
dc.description.abstract	© 2018 Elsevier Inc. Backtesting is a technique for validating internal models under Solvency II, which allows for evaluating the discrepancies between the results provided by a model and real observations. This paper aims to establish various backtesting tests and to show their applications to equity risk in Solvency II. Normal and empirical models with a rolling window are used to determine VaR at the 99.5% confidence level over a one-year time horizon. The proposed methodology performs the backtesting of annualized returns arising from the accumulation of daily returns. The results show that even if a model is conservative when tested out of a sample, it may be inadequate when evaluated in a sample, thereby highlighting the problems inherent in the out-of-sample backtesting proposed by the regulator.	en_US
dc.relation.ispartof	Journal of Business Research	en_US
dc.relation.isbasedon	10.1016/j.jbusres.2018.01.004	en_US
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject.classification	Marketing	en_US
dc.title	Backtesting an equity risk model under Solvency II	en_US
dc.type	Journal Article
utslib.citation.volume	89	en_US
utslib.for	0806 Information Systems	en_US
utslib.for	1599 Other Commerce, Management, Tourism and Services	en_US
utslib.for	1505 Marketing	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Engineering and Information Technology
pubs.organisational-group	/University of Technology Sydney/Faculty of Engineering and Information Technology/School of Information, Systems and Modelling
utslib.copyright.status	closed_access	*
pubs.publication-status	Published	en_US
pubs.volume	89	en_US

Abstract:

© 2018 Elsevier Inc. Backtesting is a technique for validating internal models under Solvency II, which allows for evaluating the discrepancies between the results provided by a model and real observations. This paper aims to establish various backtesting tests and to show their applications to equity risk in Solvency II. Normal and empirical models with a rolling window are used to determine VaR at the 99.5% confidence level over a one-year time horizon. The proposed methodology performs the backtesting of annualized returns arising from the accumulation of daily returns. The results show that even if a model is conservative when tested out of a sample, it may be inadequate when evaluated in a sample, thereby highlighting the problems inherent in the out-of-sample backtesting proposed by the regulator.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/130142