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tbfi

Time between failures independence test for value-at-risk (VaR) backtesting

Syntax

TestResults = tbfi(vbt)
TestResults = tbfi(vbt,Name,Value)

Description

example

TestResults = tbfi(vbt) generates the time between failures independence (TBFI) test for value-at-risk (VaR) backtesting.

example

TestResults = tbfi(vbt,Name,Value) adds an optional name-value pair argument for TestLevel.

Examples

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Create a varbacktest object.

load VaRBacktestData
vbt = varbacktest(EquityIndex,Normal95)
vbt = 

  varbacktest with properties:

    PortfolioData: [1043x1 double]
          VaRData: [1043x1 double]
      PortfolioID: "Portfolio"
            VaRID: "VaR"
         VaRLevel: 0.9500

Generate the tbfi test results.

TestResults = tbfi(vbt)
TestResults =

  1x14 table

    PortfolioID    VaRID    VaRLevel     TBFI     LRatioTBFI    PValueTBFI    Observations    Failures    TBFMin    TBFQ1    TBFQ2    TBFQ3    TBFMax    TestLevel
    ___________    _____    ________    ______    __________    __________    ____________    ________    ______    _____    _____    _____    ______    _________

    "Portfolio"    "VaR"    0.95        reject    88.491        0.0047475     1043            57          1         3        9        25.25    85        0.95     

Use the varbacktest constructor with name-value pair arguments to create a varbacktest object.

load VaRBacktestData
    vbt = varbacktest(EquityIndex,...
       [Normal95 Normal99 Historical95 Historical99 EWMA95 EWMA99],...
       'PortfolioID','Equity',...
       'VaRID',{'Normal95' 'Normal99' 'Historical95' 'Historical99' 'EWMA95' 'EWMA99'},...
       'VaRLevel',[0.95 0.99 0.95 0.99 0.95 0.99])
vbt = 

  varbacktest with properties:

    PortfolioData: [1043x1 double]
          VaRData: [1043x6 double]
      PortfolioID: "Equity"
            VaRID: [1x6 string]
         VaRLevel: [0.9500 0.9900 0.9500 0.9900 0.9500 0.9900]

Generate the tbfi test results using the TestLevel optional input.

TestResults = tbfi(vbt,'TestLevel',0.90)
TestResults =

  6x14 table

    PortfolioID        VaRID         VaRLevel     TBFI     LRatioTBFI    PValueTBFI    Observations    Failures    TBFMin    TBFQ1    TBFQ2    TBFQ3    TBFMax    TestLevel
    ___________    ______________    ________    ______    __________    __________    ____________    ________    ______    _____    _____    _____    ______    _________

    "Equity"       "Normal95"        0.95        reject    88.491        0.0047475     1043            57          1             3     9       25.25     85       0.9      
    "Equity"       "Normal99"        0.99        accept    22.929          0.15157     1043            17          3         21.25    48       78.25    215       0.9      
    "Equity"       "Historical95"    0.95        reject    82.719         0.022513     1043            59          1             3    13          25     85       0.9      
    "Equity"       "Historical99"    0.99        accept    16.228          0.18101     1043            12          3          19.5    45       152.5    200       0.9      
    "Equity"       "EWMA95"          0.95        accept    71.635          0.12517     1043            59          1             4    13       25.75     82       0.9      
    "Equity"       "EWMA99"          0.99        reject     31.83         0.080339     1043            22          2            16    40          56    143       0.9      

Input Arguments

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varbacktest (vbt) object, contains a copy of the given data (the PortfolioData and VarData properties) and all combinations of portfolio ID, VaR ID, and VaR levels to be tested. For more information on creating a varbacktest object, see varbacktest.

Name-Value Pair Arguments

Specify optional comma-separated pairs of Name,Value arguments. Name is the argument name and Value is the corresponding value. Name must appear inside single quotes (' '). You can specify several name and value pair arguments in any order as Name1,Value1,...,NameN,ValueN.

Example: TestResults = tbfi(vbt,'TestLevel',0.99)

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Test confidence level, specified as the comma-separated pair consisting of 'TestLevel' and a numeric between 0 and 1.

Data Types: double

Output Arguments

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tbfi test results, returned as a table where the rows correspond to all combinations of portfolio ID, VaR ID, and VaR levels to be tested. The columns correspond to the following information:

  • 'PortfolioID' — Portfolio ID for the given data

  • 'VaRID' — VaR ID for each of the VaR data columns provided

  • 'VaRLevel' — VaR level for the corresponding VaR data column

  • 'TBFI' — Categorical array with the categories accept and reject that indicate the result of the tbfi test

  • 'LRatioTBFI' — Likelihood ratio of the tbfi test

  • 'PValueTBFI' — P-value of the tbfi test

  • 'Observations' — Number of observations

  • 'Failures' — Number of failures

  • 'TBFMin' — Minimum value of observed times between failures

  • 'TBFQ1' — First quartile of observed times between failures

  • 'TBFQ2' — Second quartile of observed times between failures

  • 'TBFQ3' — Third quartile of observed times between failures

  • 'TBFMax' — Maximum value of observed times between failures

  • 'TestLevel' — Test confidence level

Note

For tbfi test results, the terms accept and reject are used for convenience, technically a tbfi test does not accept a model. Rather, the test fails to reject it.

More About

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Time Between Failures Independence (TBIF) Test

The tbfi function performs the time between failures independence test. This test is an extension of Kupiec's time until first failure (TUFF) test.

TBFI was proposed by Haas (2001) to test for independence. It takes into account not only the time until the first failure, but also the time between all failures. For the time between failures mixed test, see the tbf function.

Algorithms

The likelihood ratio (test statistic) of the TBFI test is the sum of TUFF likelihood ratios for each time between failures. If x is the number of failures, and n1 is the number of periods until the first failure, n2 the number of periods between the first and the second failure, and, in general, ni is the number of periods between failure i1 and failure i, then a likelihood ratio LRatioTBFIi for each ni is based on the TUFF formula

LRatioTBFIi=LRatioTUFF(ni)=2i=1xlog(pVaR(1pVaR)ni1(1ni)(11ni)ni1)=2(log(pVaR)+(ni1)log(1pVaR)+nilog(ni)(ni1)log(ni1))

As with the tuff test, LRatioTBFIi = −2log(pVaR) if ni = 1.

The TBFI likelihood ratio LRatioTBFI is then the sum of the individual likelihood ratios for all times between failures

LRatioTBFI=i=1xLRatioTBFIi

which is asymptotically distributed as a chi-square distribution with x degrees of freedom, where x is the number of failures.

The p-value of the tbfi test is the probability that a chi-square distribution with x degrees of freedom exceeds the likelihood ratio LRatioTBFI

PValueTBFI=1F(LRatioTBFI)

where F is the cumulative distribution of a chi-square variable with x degrees of freedom and x is the number of failures.

The result of the test is to accept if

F(LRatioTBFI)<F(TestLevel)

and reject otherwise, where F is the cumulative distribution of a chi-square variable with x degrees of freedom and x is the number of failures.

If there are no failures in the sample, the test statistic is not defined. This is handled the same as a TUFF test with no failures. For more information, see tuff.

References

[1] Haas, M. "New Methods in Backtesting." Financial Engineering, Research Center Caesar, Bonn, 2001.

Introduced in R2016b

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