Before revision:  So far there are no established backtesting procedures for EL, quantifying its impact with regards to pricing or risk adjusted profitability measures, such as RARORAC . In this paper, a practically oriented, top-down approach to assess the quality of EL by backtesting with actually observed risk impact on capital is introduced.
After revision:  So far there are no established backtesting procedures for EL, quantifying its impact with regards to pricing or risk adjusted profitability measures, such as RAROC or EVA . In this paper, a practically oriented, top-down approach to assess the quality of EL by backtesting with actually observed risk impact on capital is introduced.