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Volatility forecasts evaluation and comparison
Author(s) -
Laurent Sébastien,
Violante Francesco
Publication year - 2011
Publication title -
wiley interdisciplinary reviews: computational statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.693
H-Index - 38
eISSN - 1939-0068
pISSN - 1939-5108
DOI - 10.1002/wics.190
Subject(s) - volatility (finance) , econometrics , imperfect , proxy (statistics) , computer science , stochastic volatility , consistency (knowledge bases) , series (stratigraphy) , economics , machine learning , artificial intelligence , linguistics , philosophy , paleontology , biology
This article surveys the most important developments in volatility forecast comparison and model selection. We review a number of evaluation methods and testing procedures for predictive accuracy based on statistical loss functions. We also review recent contributions on the admissible form of loss functions ensuring consistency of the ordering when forecast performances are evaluated with respect to an imperfect volatility proxy. The techniques discussed are illustrated using artificial and EUR/USD exchange rate data. WIREs Comp Stat 2012, 4:1–12. doi: 10.1002/wics.190 This article is categorized under: Statistical Models > Time Series Models Data: Types and Structure > Time Series, Stochastic Processes, and Functional Data Applications of Computational Statistics > Computational Finance