Financial Econometrics and Empirical Market Microstructure
Analysis and Backtesting
The backtesting of simulated return and price time-series shows that our approach is able to reproduce some stylized facts (Andersen and Davis 2009). There is an autocorrelation in the absolute values of simulated returns (Malmsten and Terasvirta 2004), but it decays very fast (Fig. 7).
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Table 3 Estimated risk-metrics on scenarios
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QQ-charts show that the distribution of simulated returns differs from normal and (Fig. 8) and demonstrates heavy-tails fairly close to the distribution of historical returns (Fig. 9).
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