Evaluating density forecasts with applications to financial risk management

Evaluating density forecasts with applications to financial risk management

We propose methods for evaluating density forecasts. We focus primarily on methods that are applicable regardless of the particular user’s loss function. We illustrate the methods with a detailed simulation example, and then we present an application to density forecasting of daily stock market retu...

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Bibliographic Details
Main Authors: Diebold, Francis X., Gunther, Todd A., TAY, Anthony S.
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 1998
Subjects:
Analytical forecasting
Density estimation
Histograms
Autocorrelation
Probabilities
Finance
International economics
Probability forecasts
Forecasting models
Economic statistics
Econometrics
Economics
Online Access:https://ink.library.smu.edu.sg/soe_research/69
https://ink.library.smu.edu.sg/context/soe_research/article/1068/viewcontent/EvaluatingDensityForecastsFinRiskMgt_1998_IEA_afv.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:We propose methods for evaluating density forecasts. We focus primarily on methods that are applicable regardless of the particular user’s loss function. We illustrate the methods with a detailed simulation example, and then we present an application to density forecasting of daily stock market returns. We discuss extensions for improving suboptimal density forecasts, multi-step-ahead density forecast evaluation, multivariate density forecast evaluation, monitoring for structural change and its relationship to density forecasting, and density forecast evaluation with known loss function.

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