#99-05
"Real-Time Multivariate Density Forecast Evaluation and Calibration: Monitoring the Risk of High-Frequency Returns on Foreign Exchange"
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.
Copyright © 1998 F.X. Diebold, J. Hahn, and A.S. Tay. This paper is also available at http://www.ssc.upenn.edu/~diebold/ and may be freely reproduced for educational and research purposes, so long as it is not altered, this copyright notice is reproduced with it, and it is not sold for profit.
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