Multinomial Backtesting of Distortion Risk Measures

17 Jan 2022  ·  Sören Bettels, Sojung Kim, Stefan Weber ·

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.

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