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VaR Backtesting in Turbulent Market Conditions

Posted on Mar 01, 2023

With recent turbulent market conditions due to Covid-19, inflation and the Russia-Ukraine conflict, banks have been finding it challenging to accurately model their risk exposures. Volatility scaling is a simple and robust methodology that can be used to enhance VaR models, making them more reactive to shifts in market regimes and black swan events. The use of volatility scaling can significantly improve VaR model backtesting performance, reducing the number of VaR exceptions and overall capital requirements.

In this publication we evaluate the performance and stability of volatility scaling benchmarked against alternative VaR methodologies on a range of portfolios. Read our published briefing here.

For more information or if you have any questions please contact:

Dilbagh Kalsi
Partner, Head of UK Practice
Fintegral UK Ltd
+44 7703 788 016

Mark Baber
Fintegral UK Ltd
+44 7807 611 604

Daniil Kushko
Senior Consultant
Fintegral UK Ltd
+44 7534 296 110

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