Real-Time Multivariate Density Forecast Evaluation and Calibration: Monitorlng the Risk of High-Frequency Returns on Foreign Exchange

38 Pages Posted: 31 Oct 2008

See all articles by Francis X. Diebold

Francis X. Diebold

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

Jinyong Hahn

University of California, Los Angeles

Anthony S. Tay

Singapore Management University - School of Economics

Date Written: December 1998

Abstract

We provide a framework for evaluating and improving multivariate density forecasts.Among other things, the multivariate framework lets us evaluate the adequacy of density forecastsinvolving cross-variable interactions, such as time-varying conditional correlations. We alsoprovide conditions under which a technique of density forecast "calibration" can be used toimprove deficient density forecasts. Finally, motivated by recent advances in financial riskmanagement, we provide a detailed application to multivariate high-frequency exchange ratedensity forecasts.

Suggested Citation

Diebold, Francis X. and Hahn, Jinyong and Tay, Anthony S., Real-Time Multivariate Density Forecast Evaluation and Calibration: Monitorlng the Risk of High-Frequency Returns on Foreign Exchange (December 1998). NYU Working Paper No. SOR-98-7, Available at SSRN: https://ssrn.com/abstract=1290958

Francis X. Diebold (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-1507 (Phone)
215-573-4217 (Fax)

HOME PAGE: http://www.ssc.upenn.edu/~fdiebold/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jinyong Hahn

University of California, Los Angeles ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095-1361
United States

Anthony S. Tay

Singapore Management University - School of Economics ( email )

90 Stamford Road
178903
Singapore

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