Francis X. Diebold, Jinyong Hahn, Anothony S. Tay
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 forecasts involving
cross-variable interactions, such as time-varying conditional
correlations. We also provide conditions under which a technique of
density forecast "calibration" can be used to improve deficient density
forecasts. Finally, motivated by recent advances in financial risk
management, we provide a detailed application to multivariate
high-frequency exchange rate density forecasts.
Diebold (212) 998- fdiebold@mail.sas.upenn.edu
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