Properties of Exceedance-Based Backtest Exceedance-based backtesting evaluates the accuracy of a Value-at-Risk (VaR) model by comparing the actual number of exceedances (i.e., number of times the loss exceeds the VaR) against the expected number of losses under the model’s confidence level. A well-calibrated VaR model should align with observed risk outcomes, neither underestimating nor overestimating […]

For example, the cash required to settle a securities trade on behalf of a dealer client could be wired to the dealer’s counterparty (or that counterparty’s own clearing bank) before the necessary cash actually appears in the dealer’s clearing account on that day, under the premise that the dealer will receive sufficient cash from other […]

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