
doi: 10.2139/ssrn.3154989
The paper includes our recent findings on the backtesting for the EPE model to obtain the internal-model method approval. The challenge on the EPE backtesting is to obtain the statistical appealing threshold for overlapping horizons. We obtain the empirical thresholds using the random number skipping technique and obtain a model penalty function to investigate the model performance in the backtesting history.
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