However, given the simplicity and want of better alternative, VaR continues to be used supplemented with many other aspects like back testing to check the accuracy of the VaR model, stress testing and scenario analysis to assess the potential impact of plausible adverse market conditions among other measures.
12) For the advanced market risk approach, a bank will need to classify its back-testing outcomes into three zones depending on the number of exceptions arising from backtesting.The extreme zone is the red zone if the back-testing results produce ten or more exceptions in which case the multiplication factors for both VaR and stressed VaR will be increased from three to four.