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Capstone 02 · Financial risk

FX Volatility & Risk

Build a defensible market-risk pipeline from return construction to sequential backtesting. Diagnose volatility clustering, forecast conditional risk, distinguish VaR from Expected Shortfall, and test both coverage and exception dependence.

Data design and provenance

The project uses a deterministic synthetic business-daily USD-per-EUR series because external observation reuse permission was not verified for this build. Its orientation and frequency follow the official ECB daily USD/EUR reference-rate series; no ECB observations are redistributed.

What expert work looks like

Risk forecasts declare the horizon, tail probability, loss orientation, estimation window, and exception rule in advance. A model that produces plausible volatility but fails coverage or independence backtests is not production-ready.