Evaluating Density Forecasts with Applications to Financial Risk Management
22 Pages Posted: 31 Oct 2008
Date Written: November 1998
Density forecasting is increasingly more important and commonplace, forexample in financial risk management, yet little attention has been given to theevaluation of density forecasts. We develop a simple and operational frameworkfor density forecast evaluation. We illustrate the framework with adetailed application to density forecasting of asset returns in environments withtime-varying volatility. Finally, we discuss several extensions.
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