backtesting value at risk independence test codes

i have been trying to do backtesting using the following code, but i get an error saying the functtion defination is not permited in this context.the codes are as follows:-

function res=ind_test(V)
  T=length(V);
  J=zeros(T,4);
  for i = 2:T
    J(i,1)=V(i-1)==0 & V(i)==0;
    J(i,2)=V(i-1)==0 & V(i)==1;
    J(i,3)=V(i-1)==1 & V(i)==0;
    J(i,4)=V(i-1)==1 & V(i)==1;
  end  
  V_00=sum(J(:,1));
  V_01=sum(J(:,2));
  V_10=sum(J(:,3));
  V_11=sum(J(:,4));
  p_00=V_00/(V_00+V_01);
  p_01=V_01/(V_00+V_01);
  p_10=V_10/(V_10+V_11);
  p_11=V_11/(V_10+V_11);
  hat_p=(V_01+V_11)/(V_00+V_01+V_10+V_11);
  a=(1-hat_p)^(V_00+V_10)*(hat_p)^(V_01+V_11);
  b=(p_00)^(V_00)*(p_01)^(V_01)*(p_10)^(V_10)*p_11^(V_11);
  res= -2*log(a/b);
end

Answer 1

[Star Strider]

The problem may be that you are using the function in a script .m file. Function definitions (except Aononymous Functions) are not permitted in script .m files.

Save your function (the one you listed in your Question) as: ind_test.m in your MATLAB search path. Then call it from your script as:

res = ind_test(V);

That should work.

[shreya]

thanks a lot! it worked

but i am facing another problem now, I am completely new to matlab. I got the above codes for backtesting from a website and now i see i am not getting the codes right.

I aim to forecast VaR values and do backtesting. however, i have my VaR values which i got from using the software WINRATS. I could not perform backtesting on that very software so thought of trying matlab since the codes available.

could you please tell me how to apply the codes for backtesting if i already have VaR values?

It would be great help.

[Star Strider]

My pleasure!

I’m glad it worked!

Unfortunately, I have no knowledge at all of backtesting, so I can’t help you with that. According to the documentation, the Financial Toolbox and Econometrics Toolbox, specifically the documentation on Vector Autoregressive Models, might be able to help.

That’s the best I can do. I’m not an Economist, so I don’t have the background to help you.