Add model risk validation documentation (measurement + backtesting)

Author: sensor-aae

docs/model_risk_report.md

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+# Model Risk Report (V1) — Market Risk VaR/ES
+
+## 1. Purpose
+Demonstrate a validation-ready risk engine that:
+1) computes VaR/ES under clear assumptions and conventions, and  
+2) evaluates reliability using standard model risk diagnostics.
+
+## 2. Loss Convention (Non-negotiable)
+All risk measures are reported as **positive loss amounts**:
+- returns < 0 represent losses
+- VaR, ES ≥ 0
+- ES ≥ VaR
+
+## 3. Models Implemented
+### 3.1 Historical Simulation (HS)
+- VaR computed as the empirical *(1 − α)* quantile of portfolio returns
+- ES computed as the conditional mean of returns beyond the VaR threshold
+
+### 3.2 Parametric Normal
+- assumes portfolio returns are approximately normal
+- VaR/ES derived from μ and σ using Φ^{-1}(α) and φ(z)
+
+### 3.3 Monte Carlo (MVN)
+- simulates multivariate normal returns using sample μ, Σ
+- includes light covariance shrinkage toward diagonal for stability
+- VaR/ES computed from simulated portfolio return distribution
+
+### 3.4 Filtered Historical Simulation (GARCH-lite)
+- fixed-parameter GARCH(1,1) volatility filter produces σ_t
+- standardized residuals z_t = r_t / σ_t
+- VaR/ES computed from z distribution and scaled by σ_{t+1}
+
+## 4. Validation Approach
+### 4.1 Rolling Backtest (1-day VaR)
+- estimate VaR_t from trailing window using data up to t−1
+- exception occurs if realized r_t falls below VaR threshold
+- output: exception series and backtest summary
+
+### 4.2 Kupiec POF (Unconditional Coverage)
+- H₀: exception probability equals (1 − α)
+- returns LR statistic and p-value
+- small p-values indicate rejection of correct coverage
+
+## 5. Known Limitations (Explicit)
+- HS assumes returns are iid/stationary within window
+- Normal and MVN assume elliptical tails and may understate tail risk
+- GARCH-lite uses fixed parameters (not MLE-estimated)
+- Backtest currently targets unconditional coverage only (no independence test in V1)
+
+## 6. Next Validation Extensions (Planned)
+- Christoffersen independence / conditional coverage
+- stress testing of window sensitivity and α calibration
+- bootstrap confidence intervals for VaR estimates