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Full-Text Articles in Social and Behavioral Sciences
Evaluating Density Forecasts With Applications To Financial Risk Management, Francis X. Diebold, Todd A. Gunther, Anthony S. Tay
Evaluating Density Forecasts With Applications To Financial Risk Management, Francis X. Diebold, Todd A. Gunther, Anthony S. Tay
Research Collection School Of Economics
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.
The Conditional Heteroscedasticity Of The Yen-Dollar Exchange Rates, Yiu Kuen Tse
The Conditional Heteroscedasticity Of The Yen-Dollar Exchange Rates, Yiu Kuen Tse
Research Collection School Of Economics
This paper examines the conditional heteroscedasticity of the yen-dollar exchange rate. A model is constructed by extending the asymmetric power autoregressive conditional heteroscedasticity model to a process that is fractionally integrated. It is found that, unlike the equity markets, the appreciation and depreciation shocks of the yen against the dollar have similar effects on future volatilities. Although the results reject both the stable and the integrated models, our analysis of the response coefficients of the past shocks and the application of the models to the estimation of the capital requirements for trading the currencies show that there are no substantial …