A New Independence Test for VaR Violations

Interval forecasts evaluation can be reduced to examining the unconditional coverage and independence properties of the hit sequence. In this work we propose a definition for tendency to clustering of violations and an exact independence test for the hit sequence. This test is suitable to detect models with a tendency to generate clusters of violations and is based on an exact distribution that does not depend on any unknown parameter. Moreover, we provide evidence through a simulation study that the suggested test performs better than other tests presented in the literature.