Stress Testing And Backtesting

Stress Testing and Back-testing for UCITS [6]

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Bullet points include: Back-testing involves comparing observed with expected outcomes. Quantile-quantile plot does this. Ideally we seek a model whose observed vs. expected plot is a straight line at a 45-degree angle (if x-axis suitably defined). For the future, although back-testing only shows us what happened in the past! Finding model parameters that achieve this also called calibration

Bullet points include: Back-testing involves comparing observed with expected outcomes. Quantile-quantile plot does this. Ideally we seek a model whose observed vs. expected plot is a straight line at a 45-degree angle (if x-axis suitably defined). For the future, although back-testing only shows us what happened in the past! Finding model parameters that achieve this also called calibration

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