Horizon Problems and Extreme Events in Financial Risk Management

Economic Policy Review, Vol. 4, No. 3, October 1998

Wharton Financial Institutions Center 98-16

10 Pages Posted: 10 Feb 1999

See all articles by Peter Christoffersen

Peter Christoffersen

University of Toronto - Rotman School of Management; Copenhagen Business School; Aarhus University - CREATES

Francis X. Diebold

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Til Schuermann

Oliver Wyman

Date Written: April 1998

Abstract

Is volatility forecastability important for long-horizon risk management, or is a traditional constant-volatility assumption adequate? In this paper, the authors address this question, exploring the interface between long-horizon financial risk management and long-horizon volatility forecastability and, in particular, whether long-horizon volatility is forecastable enough such that volatility models are useful for long-horizon risk management.

Keywords: capital regulation

JEL Classification: G2, G3

Suggested Citation

Christoffersen, Peter and Diebold, Francis X. and Schuermann, Til, Horizon Problems and Extreme Events in Financial Risk Management (April 1998). Economic Policy Review, Vol. 4, No. 3, October 1998, Wharton Financial Institutions Center 98-16, Available at SSRN: https://ssrn.com/abstract=145167 or http://dx.doi.org/10.2139/ssrn.145167

Peter Christoffersen (Contact Author)

University of Toronto - Rotman School of Management ( email )

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Francis X. Diebold

University of Pennsylvania - Department of Economics ( email )

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Til Schuermann

Oliver Wyman ( email )

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