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Hard · backtesting · Quant Researcher interview question · christoffersen, conditional_coverage, var_backtesting, independence_test, backtesting
The Christoffersen (1998) conditional coverage test is a statistical backtest for Value-at-Risk (VaR) models. It jointly tests if the frequency of VaR violations is correct (unconditional coverage) and if the violations are independent over time. In quantitative finance, this test is essential for validating risk models, as it can detect issues like volatility clustering where violations occur in groups, a sign of a poor model specification. Task Implement the function christoffersen_cc_test(hi