backtesting back-testing

backtesting back-testing

In general, the process of comparing predictions from a forecasting model to observable data. A model may be run using historical inputs after which the mode's forecast is compared to the actual outcomes observed for the forecasted period. In practice, either final model outputs or intermediate calculations may be backtested. Backtesting is often inexact because of the impact of extraneous events on the observable data.

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Category: Personal banking
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Related terms

backtesting

Banking; Investment banking

Checking value-at-risk calculations and investment and hedge strategies against historic data. Backtesting enables the robustness of models to be tested under market conditions.

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Creating a hypothetical portfolio performance history by applying current asset selection criteria to prior time periods.

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