Infrequent MtM reduces neither value-at-risk nor backtesting exceptions
Frequency of repricing impacts volatility and correlation measures
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Eduardo Epperlein and Jean Herskovits assess the effects of infrequent mark-to-market updates on value-at-risk calibration and on the portfolio against which the VAR is backtested. They then relate their observations to the non-modellable risk factor framework adopted by the Fundamental Review of the Trading Book
The Basel Fundamental Review of the Trading Book (FRTB)
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