BBVA in 2013

Validation of the model

Print this page

The internal market risk model is validated regularly through backtesting, both in BBVA, S.A. and BBVA Bancomer. The aim of these tests is to check the quality and precision of the internal model used by BBVA Group to estimate the maximum daily loss of a portfolio, with 99% of confidence and a time horizon of 250 days, through a comparison of the Group’s results and the risk measurements generated by the model. These tests have shown that the internal market risk model of BBVA, S.A. and BBVA Bancomer is adequate and precise.

Two types of backtesting were performed in 2013:

  • “Hypothetical” backtesting: the daily VaR is compared with the results obtained without taking into account the intraday results or changes in the portfolio positions. This validates the appropriateness of the market risk metric for the end-of-day position.
  • “Real” backtesting: the daily VaR is compared with total results, including the intraday operations, but discounting the possible charges or fees generated. This type of backtesting incorporates the intraday risk in the portfolios.

In addition, each of these two types of backtesting has been carried out at the risk factor or business type level, thus comparing in more details the results obtained and the risk measurements.