Back Test

Back test is a statistic method that verifies actual losses in comparison with the previously predicted or projected losses through initial margin calculations (potential future exposures). Back test is used to measure the accuracy of initial margin calculations which are computed based on historical data, such as Historical Simulation Value at Risk (HSVaR), Alternate HSVaR, and Standardized Portfolio Analysis of Risk (SPAN) risk measurement models. The model will be considered accurate when actual losses do not exceed initial margin for a specific level of tolerance.