VAR lookbacks should shift dynamically, research suggests
Change-point analysis method helps identify regime shifts in equities markets, quants claim
Calculating value-at-risk using historical data involves finding a way between two common pitfalls. If the window of historical data considered is too small, the result will be extremely volatile, as the dataset of daily data points will turn over rapidly. But if too long a lookback is used, the danger is it includes data that is no longer relevant, because it comes from a period in history that is too remote to be comparable to the present day.
Basel II mandated banks using their own models to
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