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

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  • Francis X. Diebold
  • Jinyong Hahn
  • Anthony 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 forecasts. Finally by recent advances in financial risk management, we provide a detailed application to multivariate high-frequency exchange rate density forecasts.

Suggested Citation

  • Francis X. Diebold & Jinyong Hahn & Anthony S. Tay, 1998. "Real-Time Multivariate Density Forecast Evaluation and Calibration: Monitoring the Risk of High-Frequency Returns on Foreign Exchange," NBER Working Papers 6845, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6845
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    Cited by:

    1. Lopez, Jose A. & Saidenberg, Marc R., 2000. "Evaluating credit risk models," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 151-165, January.
    2. Stefan Jaschke & Gerhard Stahl & Richard Stehle, 2007. "Value-at-risk forecasts under scrutiny—the German experience," Quantitative Finance, Taylor & Francis Journals, vol. 7(6), pages 621-636.

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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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