[R] rugarch package: VaRTest()
pdalgd at gmail.com
Sat Jul 29 23:29:38 CEST 2017
If you run the example on the help page (example() won't work, but just copy/paste it) it certainly looks like the intention is that VaR is a left-tail thing, so usually negative. E.g.
> sum(actual < VaR)
Min. :1991-02-27 00:00:00 Min. :-0.04919
1st Qu.:1992-08-19 18:00:00 1st Qu.:-0.02765
Median :1994-02-10 12:00:00 Median :-0.02368
Mean :1994-02-12 12:01:36 Mean :-0.02492
3rd Qu.:1995-08-08 06:00:00 3rd Qu.:-0.02109
Max. :1997-01-30 00:00:00 Max. :-0.01594
this is somewhat contrary to conventional definition where VaR is an _upper_ quantile in a _loss_ distribution, which of course differs from the _return_ distribution by sign and a multiplication with the invested amount. I gather, however, that the conventions are not too solid and may e.g. vary between textbooks.
> On 29 Jul 2017, at 16:11 , T.Riedle <tr206 at kent.ac.uk> wrote:
> Dear all,
> I want to backtest my Value at Risk output using the VaRTest() function in the rugarch package. I do not understand if the numeric vector of VaR which needs to be calculated is in negative or positive terms. Usually VaR is expressed in positive terms.
> Do I have to use positive values for VaR in the VaRTest() formula?
> Thanks for your help.
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