Journal of Risk Model Validation

Risk.net

A note on the Berkowitz test with discrete distributions

Alfred Hamerle and Kilian Plank

ABSTRACT

Berkowitz (2001) suggested a powerful and popular density test based on a probability integral transformation. For the probability integral transformation to work properly the original distribution needs to be continuous. In this paper we show the problems that can arise when the procedure is applied to discrete distributions. We suggest a simple modification so that the basic assumptions of the Berkowitz test are recovered.

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